Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration

45PGA_1

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 46

Short Answer

Using the accounting equation for transaction analysis and preparing financial statements Allen Shonton recently opened his own accounting firm on April 1, which he operates as a corporation. The name of the new entity is Allen Shonton, CPA. Shonton experienced the following events during the organizing phase of the new business and its first month of operations in 2018: Apr. 5 Shonton deposited $75,000 in a new business bank account titled Allen Shonton, CPA. The business issued common stock to Shonton. 6 Paid $300 cash for letterhead stationery for new office. 7 Purchased office furniture for the office on account, $9,500. 10 Consulted with tax client and received $4,000 for services rendered. 11 Paid utilities, $190. 12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, $20,000. 18 Paid office rent, $750. 25 Received amount due from client that was billed on April 12. 27 Paid full amount of accounts payable created on April 7. 30 Cash dividends of $3,500 were paid to stockholders. Requirements 1. Analyze the effects of the events on the accounting equation of Allen Shonton, CPA. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet.

The total assets of the company is equal to its total liabilities at $94,560.

See the step by step solution

Step by Step Solution

Explanation on Transaction Analysis

Trasaction analysis helps in analyzing the effect of the transaction on the accounting equation.

Explanation on Accounting Equation

As per the accounting equation, both side of the accounting equation should be equal.

Effect of the transaction on the accounting equation is shown as follows:

Assets

=

Liabilities

+

Equity

Contributed Capital

+

Retained Earnings

Cash

+

Accounts Receivable

+

Letterhead stationary

+

Office Furniture

Accounts Payable

Common Stock

-

Dividends

+

Service Revenue

-

Rent Expense

-

Utilities Expense

Apr.5

+75,000

+75,000

Bal.

$75,000

+

$75,000

Apr.6

-300

+300

Bal.

$74,700

+

$300

=

+

$75,000

Apr.7

+9,500

+9,500

Bal.

$74,700

+

$300

+

$9,500

=

$9,500

+

$75,000

Apr.10

+4,000

+4,000

Bal.

$78,700

+

$300

+

$9,500

=

$9,500

+

$75,000

+

$4,000

Apr.11

-190

-190

Bal.

$78,510

+

$300

+

$9,500

=

$9,500

+

$75,000

+

$4,000

-

$190

Apr.12

+20,000

+20,000

Bal.

$78,510

+

$20,000

+

$300

+

$9,500

=

$9,500

+

$75,000

+

$24,000

-

$190

Apr.18

-750

-750

Bal.

$77,760

+

$20,000

+

$300

+

$9,500

=

$9,500

+

$75,000

+

$24,000

-

750

-

190

Apr.25

+20,000

-20,000

Bal.

$97,760

+

$0

+

$300

+

$9,500

=

$9,500

+

$75,000

+

$24,000

-

-$750

-

$190

Apr.27

-9,500

-9,500

Bal.

$88,260

+

$0

+

$300

+

$9,500

=

$0

+

$75,000

+

$24,000

-

$750

-

$190

Apr.30

-3500

-3,500

Bal.

$84,760

+

$0

+

$300

+

$9,500

=

$0

+

$75,000

-

$3,500

+

$24,000

-

$750

-

$190

$94,560

$94,560

Most popular questions for Business-studies Textbooks

Canyon Canoe Company is a service-based company that rents canoes for use on local lakes and rivers. Amber and Zack Wilson graduated from college about 10 years ago. They both worked for one of the “Big Four” accounting firms and became CPAs. Because they both love the outdoors, they decided to begin a new business that will combine their love of outdoor activities with their business knowledge. Amber and Zack decide that they will create a new corporation, Canyon Canoe Company, or CCC for short. The business began operations on November 1, 2018. Nov. 1 Received $16,000 cash to begin the company and issued common stock to Amber and Zack. 2 Signed a lease for a building and paid $1,200 for the first month’s rent. 3 Purchased canoes for $4,800 on account. 4 Purchased office supplies on account, $750. 7 Earned $1,400 cash for rental of canoes. 13 Paid $1,500 cash for wages. 15 Paid $50 dividends to stockholders. 16 Received a bill for $150 for utilities. (Use separate payable account.) 20 Received a bill for $175 for cell phone expenses. (Use separate payable account.) 22 Rented canoes to Early Start Daycare on account, $3,000. 26 Paid $1,000 on account related to the November 3, 2018, purchase. 28 Received $750 from Early Start Daycare for canoe rental on November 22, 2018. 30 Paid $100 dividends to stockholders. Requirements 1. Analyze the effects of Canyon Canoe Company’s transactions on the accounting equation. Use the format of Exhibit 1-6, and include these headings: Cash; Accounts Receivable; Office Supplies; Canoes; Accounts Payable; Utilities Payable; Telephone Payable; Common Stock; Dividends; Canoe Rental Revenue; Rent Expense; Utilities Expense; Wages Expense; and Telephone Expense.

Icon

Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.