Question

Ming Chen began a professional practice on June 1 and plans to prepare financial statements at the end of each month. During June, Ming Chen (the owner) completed these transactions.(a) Owner invested $68,000 cash in the company along with equipment that had a $29,000 market value in exchange for its common stock.(b) The company paid $2,100 cash for rent of office space for the month.(c) The company purchased $10,000 of additional equipment on credit (payment due within 30 days).(d) The company completed work for a client and immediately collected the $1,600 cash earned.(e) The company completed work for a client and sent a bill for $9,000 to be received within 30 days.(f) The company purchased additional equipment for $6,100 cash.(g) The company paid an assistant $3,000 cash as wages for the month.(h) The company collected $5,300 cash as a partial payment for the amount owed by the client in transaction (i) The company paid $10,000 cash to settle the liability created in transaction (j) The company paid $1,100 cash in dividends to the owner (sole shareholder).Enter the impact of each transaction on individual items of the accounting equation.

Answer 1

Answer:

ASSETS = LIABILITIES + EQUITY

a  97,000  =                  +  97,000

b  (2,100) =                  +  (2,100)

c  10,000  =        10,000  +

d  1,600  =                  +  1,600

e  9,000  =                  +  9,000

f             -  =                   +

g  (3,000) =                   +  (3,000)

h            =                   +

i  (10,000) =         (10,000)  +

j  (1,100) =                   +  (1,100)

TOTAL $101,400  =            -  +  101,400

   

Explanation:

Accounting equation is the foundation of dual entry bookkeepping  system. It is also known as the balance sheet equation that shows the relationship between ASSSET, LIABILITIES AND EQUITY. Total assets must be equal to total liabilities + Equity due to the dual entry system otherwise, it is an indication of discrepancy in during the recording.