Question

P1.6B (LO 4, 5, 6) AP Kensington Bike Repair Shop was started on April 1 by L. Depres. A summary of the April transactions follows: April 1 Invested $21,000 to start the repair shop. 2 Purchased equipment for $9,000, paying $3,000 cash and signing a note payable for the balance. 5 Paid rent for the month, $1,050. Purchased $975 of supplies on account. 9 Received $3,200 in cash from customers for repair services. 16 Provided repair services on account to customers, $2,900. 26 Collected $1,200 on account for services billed on April 16. 27 Paid for supplies purchased on April 7. Paid $290 for advertising. Withdrew $1,300 for personal use. 30 Received April utility bill, $200. 30 Paid part-time employee salaries, $1,400. 30 Billed a customer $750 for repair services. 30 Received an advance from a customer for repairs to be performed in May, $2,100. Instructions a. Prepare a tabular analysis of the effects of the above transactions on the accounting equation.

Answer 1

Solution:

Kensington Bike Repair Shop
Accounting equation for the month ended April
Event	Assets				=	Liabilities			+	Owners' Equity
	Account Receivable	Supplies	Equipment	Cash		Unearned Service Revenue	Note Payable	Account Payable		L. Depres, Capital
Apr. 1				$        21,000	=				+	$               21,000
Apr. 2			$        9,000	$        (3,000)	=		$        6,000		+
Apr. 5				$        (1,050)	=				+	$               (1,050)
Apr. 7		$        975			=			$         975	+
Apr. 9				$          3,200	=				+	$                 3,200
Apr.16	$         2,900				=				+	$                 2,900
Apr. 26	$       (1,200)			$          1,200	=				+
Apr. 27				$           (975)	=			$       (975)	+
Apr. 28				$           (290)	=				+	$                  (290)
Apr. 29				$        (1,300)	=				+	$               (1,300)
Apr. 30				$           (200)	=				+	$                  (200)
Apr. 30				$        (1,400)	=				+	$               (1,400)
Apr. 30	$             750				=				+	$                     750
Apr. 30				$          2,100	=	$        2,100			+
End. Bal.	$         2,450	$        975	$        9,000	$        19,285	=	$        2,100	$        6,000	$             -	+	$               23,610

Notes:

1) Income and expense are adjusted to capital because net effect of income and expenses are added to net income which later added to capital.

2) No Opening Balances provided.