Introduction to Accounting

In-classtask1.docx

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In-class task #1

1. Indicate the effect of each of the following on the balance sheet equation. After each transaction is properly recorded, compute subtotals for the Assets, Liabilities, and Owners' Equity, being sure to maintain the equality of the equation. Use the following format:

Example: Andrew, the owner, invested $200,000 cash into his company.

Transaction Assets = Liabilities + Owners’ Equity

“Example” +200,000 = +200,000

Subtotal 200,000 = 200,000

a. Purchased for $150,000 cash a building to be used for office space.

b. Received $3,000 for providing services to a client.

c. Paid $1,000 for office rent expense.

d. Paid $2,000 for advertising expense.

e. Bought $20,000 of merchandise inventory on account.

f. Paid $12,000 to the supplier for inventory purchases in "e" and gave a note for the remaining $8,000 promised to pay in 90 days.

g. Loaned $3,000 to his employee and accepted the employee’s 90-day note for paying him back.

h. Bought $5,000 of merchandise for cash.

i. Borrowed $3,000 from the bank.

2. Following is a list of balance sheet account titles that may be needed in recording the ten transactions that follow. For each transaction, select those accounts that would be used in journalizing and place the letters accompanying the account title in the appropriate columns for debit and credit.

a	Cash	g	Organization Costs (expenses)
b	Notes Receivable	h	Accounts Payable
c	Merchandise Inventory	i	Notes Payable
d	Supplies Inventory	j	Rent Received in Advance
e	Prepaid Insurance	k	Owners’ Equity
f	Machinery and Equipment

Transaction	Account Debited	Account Credited
Example: Bought inventory for cash	c	a
i. Paid the lawyers in cash for the legal work performed in organizing the company.
ii. Loaned money to an employee, and received a 90-day note from the employee as recognition of the debt.
iii. A 120-day note was given to the bank for a loan.
iv. Acquired supplies for cash.
v. Purchased merchandise on account.
vi. Purchased for cash a one-year insurance policy for $300.
vii. Received a one-year advance from tenants for rental property.
viii. Owners invested $20,000 cash in the company.
ix. Machinery and equipment were bought on account.
x. Paid off the creditors for inventory purchases.