Answer:
Performance Plastics Company (PPC)
Analysis of Transactions to determine their effects on the Accounting Equation:
Assets = Liabilities + Equity
a. Assets (Equipment +$21,000 Cash -$5,000) = Liabilities (Notes Payable +$16,000) + Equity
b. Assets (Cash +$20,000) = Liabilities + Equity (Common Stock +$20,000)
c. Assets (Cash +$50,000) = Liabilities (Bank Loan +$50,000) + Equity
d. Assets (Supplies +$4,000 Cash -$4,000) = Liabilities + Equity
e. Assets (Factory Building +41,000 Cash -$12,000) = Liabilities (Notes Payable +$29,000) + Equity
f. N/A
Explanation:
a) Data and Calculations:
Cash $35,000
Accounts Receivable 5,000
Inventory 40,000
Supplies 5,000
Notes Receivable
(due in three years) 2,000
Equipment 80,000
Buildings 120,000
Land 30,000
Total assets $317,000
Accounts Payable 37,000
Notes Payable
(due in three years) 80,000
Common Stock 150,000
Retained Earnings 50,000
Total liabilities +
equity $317,000
b)The accounting equation is an important accounting concept that describes the double-entry basis of accounting. It shows that at every given time and after every business transaction, the assets are always equal to the liabilities and the equity balance. This implies that the assets are funded from the contributions of creditors and owners.
