An Alternate Problem on Recording the Effects of Transactions
The items making up the balance sheet of Phillips Truck Rental at December 31 are listed below in tabular form similar to the illustration of the accounting equation in Exhibit 2–11.
| Assets | = | Liabilities | + | Owners’ Equity | |||||||
| Cash | + | Accounts Receivable | Office Equipment | + | Trucks | = | Notes Payable | + | Accounts Payable | + | Capital Stock |
Balances | $37,000 |
| $13,900 | $3,800 |
| $68,000 |
| $20,000 |
| $10,200 |
| $65,000 |
During a short period after December 31, Phillips Truck Rental had the following transactions:
1. Bought office equipment at a cost of $2,700. Paid cash.
2. Collected $4,000 of accounts receivable.
3. Paid $3,200 of accounts payable.
4. Borrowed $10,000 from a bank. Signed a note payable for that amount.
5. Purchased two trucks for $30,500. Paid $15,000 cash and signed a note payable for the balance.
6. Sold additional stock to investors for $85,000.
Instructions
a. List the December 31 balances of assets, liabilities, and owners’ equity in tabular form as shown above.
b. Record the effects of each of the six transactions in the preceding tabular arrangement. Show the totals for all columns after each transaction.
EXHIBIT 2–11 Expanded Accounting Equation
OVERNIGHT AUTO SERVICE EXPANDED ACCOUNTING EQUATION JANUARY 20–31, 2015 | ||||||||||||||||
| Assets | = | Liabilities | + | Owners’ Equity | |||||||||||
| Cash | + | Accounts Receivable | + | Tools and Equipment | + | Building | + | Land | = | Notes Payable | + | Accounts Payable | + | Capital Stock | Retained Earnings |
Jan. 20 | $80,000 |
|
|
|
|
|
|
|
| = |
|
|
|
| $80,000 |
|
Balances | $80,000 |
|
|
|
|
|
|
|
| = |
|
|
|
| $80,000 |
|
Jan. 21 | -52,000 |
|
|
|
|
|
|
| +$52,000 x | = |
|
|
|
|
|
|
Balances | $28,000 |
|
|
|
|
|
|
| $52,000 |
|
|
|
|
| $80,000 |
|
Jan. 22 | -6,000 |
|
|
|
|
| +$36,000 |
|
| = | +$30,000 |
|
|
|
|
|
Balances | $22,000 |
|
|
|
|
| $36,000 |
| $52,000 | = | $30,000 |
|
|
| $80,000 |
|
Jan. 23 |
|
|
|
| +$13,800 |
|
|
|
| = |
|
| +$13,800 |
|
|
|
Balances | $22,000 |
|
|
| $13,800 |
| $36,000 |
| $52,000 | = | $30,000 |
| $13,800 |
| $80,000 |
|
Jan. 24 |
|
| +$1,800 |
| -1,800 |
|
|
|
| = |
|
|
|
|
|
|
Balances | $22,000 |
| $1,800 |
| $12,000 |
| $36,000 |
| $52,000 | = | $30,000 |
| $13,800 |
| $80,000 |
|
Jan. 26 | +600 |
| -600 |
|
|
|
|
|
| = |
|
|
|
|
|
|
Balances | $22,600 |
| $1,200 |
| $12,000 |
| $36,000 |
| $52,000 | = | $30,000 |
| $13,800 |
| $80,000 |
|
Jan. 27 | -6.800 |
|
|
|
|
|
|
|
| = |
|
| -6,000 |
|
|
|
Balances | $15,800 |
| $1,200 |
| $12,000 |
| $36,000 |
| $52,000 | = | $30,000 |
| $7,000 |
| $80,000 |
|
Jan. 31 | +2.200 |
|
|
|
|
|
|
|
| = |
|
|
|
|
| +$2,200 |
Jan. 31 | -1,400 |
|
|
|
|
|
|
|
| = |
|
|
|
|
| -1,400 " |
Balances | $16,600 |
| $1,200 |
| $12,000 |
| $36,000 |
| $52,000 | = | $30,000 |
| $7,000 |
| $80,000 | $ 800 |
|
| Statement of Cash Flows |
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| Income Statement |
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