Q41PGA
Question
Conner Thomas started a new business, Thomas Gymnastics, and completed the following transactions during December: Dec. 1 Received \(19,000 cash from Conner in exchange for common stock. 2 Received \)3,800 cash from customers for services performed. 5 Paid \(200 cash for office supplies. 9 Performed services for a customer and billed the customer for services rendered, \)4,500. 10 Received \(200 invoice for utilities due in two weeks. 15 Paid for advertising in the local paper, \)250. 20 Paid utility invoice received on December 10. 25 Collected cash in full from customer billed on December 9. 28 Paid rent for the month, \(1,600. 28 Paid \)1,450 to assistant for wages. 30 Received \(1,400 cash from customers for services performed. 31 Cash dividends of \)3,500 were paid to stockholders. Analyze the effects of the transactions on the accounting equation of Thomas Gymnastics using a format similar to Exhibit 1-6.
Step-by-Step Solution
VerifiedEffect of the transaction on the accounting equation is shown as follows:
| Assets | = | Liabilities | + | Equity |
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Contributed Capital | + | Retained Earnings |
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Cash | + | Accounts Receivable | + | Office Supplies | Accounts Payable | Common Stock | - | Dividends | + | Service Revenue | - | Rent Expense | - | Salaries Expense | - | Utilities Expense | - | Advertising Expense | |||
Dec 1 | +19,000 |
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| +19,000 |
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Bal. | $19,000 |
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| + | $19,000 |
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Dec 2 | +3,800 |
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| +3,800 |
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Bal. | $22,800 |
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| + | $19,000 |
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| + | $3,800 |
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Dec 5 | -200 |
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| +200 |
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Bal. | $22,600 |
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| + | $200 | = |
| + | $19,000 |
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| + | $3,800 |
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Dec 9 |
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| +4,500 |
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| +4,500 |
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Bal. | $22,600 | + | $4,500 | + | $200 | = |
| + | $19,000 |
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| + | $8,300 |
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Dec 10 |
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| +200 |
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| -200 |
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Bal. | $22,600 | + | $4,500 | + | $200 | = | $200 | + | $19,000 |
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| + | $8,300 |
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| - | $200 |
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Dec 15 | -250 |
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| -250 |
Bal. | $22,350 | + | $4,500 | + | $200 | = | $200 | + | $19,000 |
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| + | $8,300 |
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| - | $200 | - | $250 |
Dec 20 | -200 |
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| -200 |
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Bal. | $22,150 | + | $4,500 | + | $200 | = | $0 | + | $19,000 |
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| + | $8,300 |
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| - | $200 | - | $250 |
Dec 25. | +4500 |
| -4,500 |
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Bal. | $26,650 | + | $0 | + | $200 | = | $0 | + | $19,000 |
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| + | $8,300 |
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| - | $200 | - | $250 |
Dec 28 | -1600 |
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| -1600 |
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Dec 28 | -1450 |
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| -1450 |
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Bal | $23,600 | + | $0 | + | $200 | = | $0 | + | $19,000 |
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| + | $8,300 | - | $1,600 | - | $1,450 | - | $200 | - | $250 |
Dec30 | +1,400 |
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| +1,400 |
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Bal | $25,000 | + | $0 | + | $200 | = | $0 | + | $19,000 |
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| + | $9,700 | - | $1,600 | - | $1,450 | - | $200 | - | $250 |
Dec 31 | -3500 |
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| -3500 |
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Bal. | $21,500 | + | $0 | + | $200 | = | $0 | + | $19,000 | - | $3,500 | + | $9,700 | - | $1,600 | - | $1,450 | - | $200 | - | $250 |
| $21,700 |
| $21,700 |
Trasaction analysis helps in analyzing the effect of the transaction on the accounting equation.
As per the accounting equation,both side of the accounting equation should be equal. .