Accounting equation problems PDF

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Accounting equation Q1.

Evaluate each of the following transactions and determine the effect on the accounting equation. Name each account as in the following example. a. Sold $900 worth of T-shirts for $2,250 on account. b. Purchased a six-month insurance policy for $6,000. c. Paid employees wages of $500. d. Received $400 cash from a customer who paid off his account receivable. e. Adjusted the books to record $1,000 of expired insurance.

Example: Sold $15,000 worth of T-shirts on account. Assets

Liabilities

EX: Account receivable, $15,000

Owners’ Equity EX: Revenue, $15,000

a. A/C Rec: 2,250 Inv: (900)

No Effect

Rev: 2,250 COGS: (900)

b. Pre-Insurance: 6,000 Cash: (6,000)

No Effect

No Effect

c. Cash (500)

No Effect

No Effect

d. Cash (400) A/C Rec: (400)

No Effect

No Effect

e. Insurance: (1,000)

No Effect

Insurance Exp: (1,000)

Q2. Evaluate each of the following transactions and determine the effect on the accounting equation. Name each account as in the following example. a. Sold $3,000 worth of T-shirts for cash. b. Purchased supplies on account for $900. c. Paid for two months rent in advance, $2,400. d. Contracted in May to deliver $1,000 worth of T-shirts to be delivered in June. e. At the end of the month, recognized one month’s rent expense.

Example: Sold $15,000 worth of T-shirts on account. Assets

Liabilities

EX. Account receivable, $15,000 a. Inv: (3,000)

Owners’ Equity EX: Revenue, $15,000

No Effect

COGS: (3,000)

b. No Effect

900

No Effect

c. No Effect

2,400

. No Effect

d. Rec: 1,000

No Effect

Rev: 1,000

e. Rent: (1,200)

No Effect

No Effect...