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Expert-verified Found in: Page 48 ### Horngren'S Financial And Managerial Accounting

Book edition 6th
Author(s) Tracie L. Miller-Nobles, Brenda L. Mattison
Pages 992 pages
ISBN 9780134486833

# Cosmo Thomas started a new business, Thomas Gymnastics, and completed the following transactions during December: Dec. 1 Received $19,000 cash from Thomas in exchange for common stock. 2 Received$3,800 cash from customers for services performed. 5 Paid $300 cash for office supplies. 9 Performed services for a customer and billed the customer for services rendered,$4,500. 10 Received $150 invoice for utilities due in two weeks. 15 Paid for advertising in the local paper,$350. 20 Paid utility invoice received on Dec. 10. 25 Collected cash in full from customer billed on Dec. 9. 28 Paid rent for the month, $2,600. 28 Paid$1,200 to assistant for wages. 30 Received $1,600 cash from customers for services performed. 31 Cash dividends of$3,000 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.

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

 Assets = Liabilities + Equity Contributed Capital + Retained Earnings Cash + Accounts Receivable + Office Supplies Accounts Payable Common Stock - Dividends + Service Revenue - Rent Expense - Advertising Expense - Salaries Expense - Utilities Expense Dec.1 +19,000 +19,000 Bal. $19,000 = +$19,000 Dec.2 +3,800 +3,800 Bal. $22,800 = +$19,000 + $3,800 Dec.5 -300 +300 Bal.$22,500 + $300 = +$19,000 + $3,800 Dec.9 +4,500 +4,500 Bal.$22,500 + $4,500 +$300 = + $19,000 +$8,300 Dec.10 +150 -150 Bal. $22,500 +$4,500 + $300 =$150 + $19,000 +$8,300 - $150 Dec.15 -350 -350 Bal.$22,150 + $4,500 +$300 = $150 +$19,000 + $8,300 -$350 - $150 Dec. 20 -150 -150 Bal.$22,000 + $4,500 +$300 = $0 +$19,000 + $8,300 -$350 - $150 Dec.25 +4,500 -4,500 Bal.$26,500 + $0 +$300 = $0 +$19,000 + $8,300 -$350 - $150 Dec.28 -3,800 -2600 -1200 Bal.$22,700 + $0 +$300 = $0 +$19,000 + $8,300 -$2,600 - $350 -$1,200 - $150 Dec.30 +1,600 +1,600 Bal.$24,300 + $0 +$300 = $0 +$19,000 + $9,900 -$2,600 - $350 -$1,200 - $150 Dec.31 -3,000 -3,000 Bal.$21,300 + $0 +$300 = $0 +$19,000 - $3,000 +$9,900 - $2,600 -$350 - $1,200 -$150 $21,600 =$21,600
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## Explanation on Transaction Analysis

Transaction analysis helps in analyzing the effect of the transactions on the accounting equation. These transactions are pertained to various operating and non-operating activities of a business organization.

## Explanation on Accounting Equation

As per the accounting equation, both sides of the accounting equation should be equal. In the given case, both sides, assets’ side and liabilities’ side are equal at \$21,600. ### Want to see more solutions like these? 