Accounting Equation with Transaction Analysis
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Please fill out the attached balance sheet using the company information provided in the Excel file.
The following are the transactions relating to the formation of Cardinal Mowing Services, Inc., and its first month of operations.
a. The firm was organized and the owners invested cash of $600.
b. The company borrowed $900 from a relative of the owners; a short-term note was signed.
c. Two lawn mowers costing $480 each and a trimmer costing $130 were purchased for cash. The original list price of each mower was $610, but a discount was received because the seller was having a sale.
d. Gasoline, oil, and several packages of trash bags were purchased for cash of $90.
e. Advertising flyers announcing the formation of the business and a newspaper ad were purchased. The cost of these items, $170, will be paid in 30 days.
f. During the first two weeks of operations, 47 lawns were mowed. The total revenue for this work was $705; $465 was collected in cash and the balance will be received within 30 days.
g. Employees were paid $420 for their work during the first two weeks.
h. Additional gasoline, oil, and trash bags costing $110 were purchased for cash.
i. In the last two weeks of the first month, revenues totaled $920, of which $375 was collected.
j. Employee wages for the last two weeks totaled $510; these will be paid during the first week of the next month.
k. It was determined that at the end of the month the cost of the gasoline, oil, and trash bags still on hand was $30.
l. Customers paid a total of $150 due from mowing services provided during the first two weeks. The revenue for these services was recognized in transaction f.
Required:
(a) Record each transaction in the appropriate columns. (Negative amount should be indicated by a minus sign. Enter the total of the expense column as a positive amount. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" signs in your response.)
Assets Liabilities
Transaction Cash + Accounts Receivable + Supplies + Equipment = Notes Payable + Accounts Payable + Paid-in Capital
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
Total
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Solution Summary
This solution is comprised of an accounting problem that uses the accounting equation to analyze transactions. Typical transactions include owner's investment, short-term note, purchase of equipment and supplies, accounts receivable, accounts payable, accrued revenue, and accrued expense. The problem also includes the calculation of net income, total assets, total liabilities, and total equity. The detail step-by-step explanation of these topics provides students with a clear understanding of the concepts.
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Solution Preview
The attached MS Excel document contained the completed fill-in balance sheet posted. The totals have all been calculated. An explanation of each transaction is provided to help the student understand how each of the transactions is determined.
a. The investment by the owner increases cash and increases the paid-in capital. (Note: The retained earnings column is used for the net income that a business retains for future use. Net income is the difference of the Revenue minus Expenses.)
b. To borrow the money the company signed a note payable (This is considered a short-term liability) and it is understood that cash was received, increased.
c. The mowers and trimmer are considered equipment. The ...
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