Answer:
Thoro Clean
a. Using the accounting equation, record each of the transactions in columnar format:
April 1
Cash $11,500 + Accounts Receivable + Supplies + Prepaid Van Lease + Equipment = Accounts Payable + Notes Payable + Common Stock $11,500 + Retained Earnings
April 2
Cash $11,500 - $2,850+ Accounts Receivable + Supplies + Prepaid Van Lease $2,850 + Equipment = Accounts Payable + Notes Payable + Common Stock $11,500 + Retained Earnings
April 3
Cash $11,500 - $2,850 + $10,000 + Accounts Receivable + Supplies + Prepaid Van Lease $2,850 + Equipment = Accounts Payable + Notes Payable $10,000 + Common Stock $11,500 + Retained Earnings
April 3
Cash $11,500 - $2,850 + $10,000 - $3,500 + Accounts Receivable + Supplies + Prepaid Van Lease $2,850 + Equipment $5,500 = Accounts Payable $2,000 + Notes Payable $10,000 + Common Stock $11,500 + Retained Earnings
April 4
Cash $11,500 - $2,850 + $10,000 - $3,500 - $4,300 + Accounts Receivable + Supplies $4,300 + Prepaid Van Lease $2,850 + Equipment $5,500 = Accounts Payable $2,000 + Notes Payable $10,000 + Common Stock $11,500 + Retained Earnings
April 7
Cash $11,500 - $2,850 + $10,000 - $3,500 - $4,300 - $350 + Accounts Receivable + Supplies $4,300 + Prepaid Van Lease $2,850 + Equipment $5,500 = Accounts Payable $2,000 + Notes Payable $10,000 + Common Stock $11,500 + Retained Earnings - Advertising Expense $350
April 21
Cash $11,500 - $2,850 + $10,000 - $3,500 - $4,300 - $350 + Accounts Receivable $3,500 + Supplies $4,300 + Prepaid Van Lease $2,850 + Equipment $5,500 = Accounts Payable $2,000 + Notes Payable $10,000 + Common Stock $11,500 + Retained Earnings - Advertising Expense $350 + Cleaning Fees Earned $3,500
April 23
Cash $11,500 - $2,850 + $10,000 - $3,500 - $4,300 - $350 - $1,500 + Accounts Receivable $3,500 + Supplies $4,300 + Prepaid Van Lease $2,850 + Equipment $5,500 = Accounts Payable $2,000 - $1,500 + Notes Payable $10,000 + Common Stock $11,500 + Retained Earnings - Advertising Expense $350 + Cleaning Fees Earned $3,500
April 28
Cash $11,500 - $2,850 + $10,000 - $3,500 - $4,300 - $350 - $1,500 + $2,300 + Accounts Receivable $3,500 - $2,300 + Supplies $4,300 + Prepaid Van Lease $2,850 + Equipment $5,500 = Accounts Payable $2,000 - $1,500 + Notes Payable $10,000 + Common Stock $11,500 + Retained Earnings - Advertising Expense $350 + Cleaning Fees Earned $3,500
April 29
Cash $11,500 - $2,850 + $10,000 - $3,500 - $4,300 - $350 - $1,500 + $2,300 + $1,000 + Accounts Receivable $3,500 - $2,300 + Supplies $4,300 + Prepaid Van Lease $2,850 + Equipment $5,500 = Accounts Payable $2,000 - $1,500 + Notes Payable $10,000 + Common Stock $11,500 + Retained Earnings - Advertising Expense $350 + Cleaning Fees Earned $3,500 + Dividends $1,000
April 30
Cash $11,500 - $2,850 + $10,000 - $3,500 - $4,300 - $350 - $1,500 + $2,300 - $1,750 - $255 + Accounts Receivable $3,500 - $2,300 + Supplies $4,300 + Prepaid Van Lease $2,850 + Equipment $5,500 = Accounts Payable $2,000 - $1,500 + Notes Payable $10,000 + Common Stock $11,500 + Retained Earnings - Advertising Expense $350 + Cleaning Fees Earned $3,500 + Dividends $1,000 - Wages $1,750 - Gasoline $255
b. Use Journal entries to record the transactions:
DATE DESCRIPTION DEBIT CREDIT
April 1 Cash Account $11,500
Common Stock $11,500
To record Randy Storm's investment of cash
April 2 Prepaid Van Lease $2,850
Cash Account $2,850
To record payment for six months' lease on a van.
April 3 Cash Account $10,000
Notes Payable $10,000
To record the borrowing of $10,000 from a bank.
April 3 Cleaning Equipment $5,500
Cash Account $3,500
Accounts Payable $2,000
To record purchase of cleaning equipment.
April 4 Cleaning Supplies $4,300
Cash Account $4,300
To record the purchase of cleaning supplies.
April 7 Advertising Expense $350
Cash Account $350
To record the payment for advertisements.
April 21 Accounts Receivable $3,500
Cleaning Fee Earned $3,500
To record the cleaning fees earned.
April 23 Accounts Payable $1,500
Cash Account $1,500
To record the payment on account.
April 28 Cash Account $2,300
Accounts Receivable $2,300
To record the receipt from customers on account.
April 29 Cash Account $1,000
Dividends $1,000
To record the receipt of dividends.
April 30 Wages Expense $1,750
Cash Account $1,750
To record the payment of wages for April.
April 30 Gasoline Expense $255
Cash Account $255
To record the payment for gasoline used during April.
Explanation:
The accounting equation is given as Assets = Liabilities + Equity. This equation is always in balance with each transaction affecting at least one or two accounts in either side of the equation. This equation explains that the assets owned by a company are made up of either owings to creditors or owners of the business.
