Answered: Indicate the effects (accounts,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Steve's Outdoor Company purchased a new delivery van on January 1 for $45,000 plus $3,800 in sales tax. The company paid $12,800 cash on the van (including the sales tax), signing an 8 percent note for the $36,000 balance due in nine months (on September 30). On January 2, the company paid cash of $700 to have the company name and logo painted on the van. On September 30, the company paid the balance due on the van plus the interest. On December 31 (the end of the accounting period), Steve's Outdoor recorded depreciation on the van using the straight-line method with an estimated useful life of 5 years and an estimated residual value of $4,500.

Required:

1. Indicate the effects (accounts, amounts, and + or −) of each transaction on the accounting equation. Use the following schedule: (If the transaction does not impact the accounting equation choose "No effect" in the first column under "Assets".)

Transcribed Image Text:### Text: Steve’s Outdoor Company purchased a new delivery van on January 1 for $45,000 plus $3,800 in sales tax. The company paid $12,800 cash on the van (including the sales tax), with the $36,000 balance on credit at 8 percent interest due in nine months (on September 30). On January 2, the company paid cash of $700 to have the company name and logo painted on the van. On September 30, the company paid the balance due on the van plus the interest. On December 31 (the end of the accounting period), Steve’s Outdoor recorded depreciation on the van using the straight-line method with an estimated useful life of 5 years and an estimated residual value of $4,500. ### Diagram Explanation: #### Table: Journal Entries | Date | Assets | Liabilities | Stockholders’ Equity | |------------|-----------------------------|-----------------------------------------|---------------------------------------| | January 1 | Equipment (Van) 48,800 | Short-term notes payable 36,000 | | | | Cash 12,800 | | | | January 2 | Equipment (Van) 700 | Cash 700 | | | September 30 | Short-term notes payable 36,000 | Cash 38,160 | | | | Interest payable 2,160 | | | #### Instructions: 1. Indicate the effects (accounts, amounts, and + or -) of each transaction on the accounting equation. Use the following schedule: (If the transaction does not impact the accounting equation choose “No effect” in the first column under “Assets”.) The table illustrates how different transactions affect the accounting equation components: Assets, Liabilities, and Stockholders’ Equity. It shows the acquisition of the van, costs of customization, payment of notes and interest, and the corresponding adjustments to cash and liabilities accounts.

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