Question

In: Accounting

a) Jan. 23, 2014 Shareholders invested $10,000 in the business and received common shares as evidence of ownership.

a) Jan. 23, 2014 Shareholders invested $10,000 in the business and received common shares as evidence of ownership.
b) Feb. 7, 2014   A computer with a cost of $2,200 was purchased on account; payment is due in 30 days.
c) Feb. 14, 2014    Fees totaling $3,000 were billed to customers; $1,000 was collected immediately and the balance is due within 30 days.
d) Feb. 18, 2014 Full payment was made for the computer purchased on Feb. 7th.
e) Feb. 22, 2014 Fees in the amount of $1,900 were collected from customers with balances due from Feb. 14th.
f) Feb. 28, 2014   Employee salaries of $8,000 were paid. Assume all workers worked for that one day and got paid at the end of the day.
Required:

Show the impact on assets, liabilities and equity. (the impact (+↑/ -↓). If there is no impact, indicate “NA”.)

Solutions

Expert Solution

Transaction Assets Liabilities Equity Reason
(a) Shareholders invested 10000 Increase by 10000 Increase by 10000 Investment made by share holders will bring assets and capital will also increase.
(b) Purchased computer on account for 2200 Increase by 2200 Increase by 2200 Assets will increase by amount of computer and liabilities will also increase as it is purchased on credit
(c) 1000 collected out of total fees 3000 from a customer Increase by 3000 Increase by 3000 It is assumed that this is a service provider and thus, sales will result in increase in profit . also, assets will increase by 3000, i.e. Cash 1000 and debtors 2000
(d) Payment made for computer purchased Decrease by 2200 Decrease by 2200 Liability is paid off in cash which will decrease assets and also decrease liabilities
(e) Fees collected for credit sales on feb 22 NA NA NA Transaction will result in increase in cash and decrease in debtors which will not affect any ot the following columns.
(f) Paid salaries totaling 8000 Decreas by 8000 Decrease by 8000 Salaries are a expense which will be charged on profit and thus, equity will decrease. cash will be paid and thus, it will also decrease

ekkarill92 answered 2 years ago
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