Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $12. At the start of January 2021, VGC’s income statement accounts had zero balances and its balance sheet account balances were as follows: Cash $ 2,260,000 Accounts Receivable 165,000 Supplies 16,900 Equipment 879,000 Buildings 481,000 Land 2,150,000 Accounts Payable 195,000 Deferred Revenue 114,000 Notes Payable (due 2025) 113,000 Common Stock 2,400,000 Retained Earnings 3,129,900 In addition to the above accounts, VGC’s chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense. The following transactions occurred during the January month: Received $72,250 cash from customers on 1/1 for subscriptions that had already been earned and charged on account in 2020. Purchased 10 new computer servers for $36,100 on 1/2; paid $16,300 cash and signed a three-year note for the remainder owed. Paid $11,100 for an Internet advertisement run on 1/3. On January 4, purchased and received $5,700 of supplies on account. Received $245,000 cash on 1/5 from customers for service revenue earned in January. On January 6, paid $5,700 cash for supplies purchased on January 4. On January 7, sold 12,600 subscriptions at $12 each for services provided during January. Half was collected in cash and half was sold on account. Paid $375,000 in wages to employees on 1/30 for work done in January. On January 31, received an electric and gas utility bill for $5,210 for January utility services. The bill will be paid in February. Required: Analyze the effect of the January transactions on the accounting equation, and indicate the account, amount, and direction of the effect of each transaction. (Enter any decreases to Assets, Liabilities, and Stockholder's Equity with a minus sign.)

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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Question

Vanishing Games Corporation (VGC) operates a massively multiplayer online game, charging players a monthly subscription of $12. At the start of January 2021, VGC’s income statement accounts had zero balances and its balance sheet account balances were as follows:

Cash	$ 2,260,000
Accounts Receivable	165,000
Supplies	16,900
Equipment	879,000
Buildings	481,000
Land	2,150,000
Accounts Payable	195,000
Deferred Revenue	114,000
Notes Payable (due 2025)	113,000
Common Stock	2,400,000
Retained Earnings	3,129,900

In addition to the above accounts, VGC’s chart of accounts includes the following: Service Revenue, Salaries and Wages Expense, Advertising Expense, and Utilities Expense. The following transactions occurred during the January month:

Received $72,250 cash from customers on 1/1 for subscriptions that had already been earned and charged on account in 2020.
Purchased 10 new computer servers for $36,100 on 1/2; paid $16,300 cash and signed a three-year note for the remainder owed.
Paid $11,100 for an Internet advertisement run on 1/3.
On January 4, purchased and received $5,700 of supplies on account.
Received $245,000 cash on 1/5 from customers for service revenue earned in January.
On January 6, paid $5,700 cash for supplies purchased on January 4.
On January 7, sold 12,600 subscriptions at $12 each for services provided during January. Half was collected in cash and half was sold on account.
Paid $375,000 in wages to employees on 1/30 for work done in January.
On January 31, received an electric and gas utility bill for $5,210 for January utility services. The bill will be paid in February.

Required:

Analyze the effect of the January transactions on the accounting equation, and indicate the account, amount, and direction of the effect of each transaction. (Enter any decreases to Assets, Liabilities, and Stockholder's Equity with a minus sign.)

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