Question: Transaction analysis and use of the basic accounting equation Required

Question

Question: Transaction analysis and use of the basic accounting equation

Required

Analyze the following transactions and show their effects on the basic accounting equation, by preparing a template as follows:

ASSETS

LIABILITIES

S/H EQUITY

Date/Ref.

Cash

A/R

Inv.

Equip.

A/P

Dividends Payable

Loan Payable

Common Shares

Rev/Exp

Rev/Exp/DD

a. Received $250,000 from the issuance of shares.

b. Borrowed $100,000 from the bank at 6% per year.

c. Purchased equipment for $178,000.

d. Purchased inventory costing $75,000, paying $50,000, with the balance on account.

e. Recorded sales of $92,000 (half cash and half on account) to customers. The inventory related to these sales had a cost of $49,000.

f. Paid $20,000 to suppliers related to the purchase on inventory in transaction (d).

g. Paid $3,700 in wages to employees.

h. Repaid loan principal of $4,000 plus interest of $1,200 related to the bank loan.

i. Recorded depreciation of $22,600 on the company's equipment.

j. Declared dividends of $8,000.

ASSETS

LIABILITIES

S/H EQUITY

Date/Ref.

Cash

A/R

Inv.

Equip.

A/P

Dividends Payable

Loan Payable

Common Shares

Rev/Exp

Rev/Exp/DD

Explanation / Answer

Assets LIABILITIES Shareholder's Equity Date / Ref. Cash + Account Receivable + Inventory + Equipment = Account payable + Dividend Payable + Loan Payable + Common Shares + Rev/ Exp + Rev/ Exp/DD a $                   2,50,000 + + + = + + + 250000 + + b $                   1,00,000 + + + = + + $                   1,00,000 + + + c $                  -1,78,000 + + + $               1,78,000 = + + + + + d $                     -50,000 + + $                   75,000 + = $                     25,000 + + + + + e $                       46,000 + $                   46,000 + + = + + + + 92000 + e + + + = + + + + + -49000 f $                     -20,000 + + + = $                    -20,000 + + + + + g $                        -3,700 + + + = + + + + + $                     -3,700 h $                        -5,200 + + + = + + $                       -4,000 + + + -1200 i + + + $                 -22,600 = + + + + + $                  -22,600 j + + + = + $                            8,000 + + + + $                      8,000 Closing Balance $                   1,39,100 $                   46,000 $                   75,000 $               1,55,400 $                        5,000 $                            8,000 $                      96,000 $                        2,50,000 $                    92,000 $                  -68,500

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