Chapter 1, Problem 13E

To determine

Concept Introduction:

Accounting equation:

It reflects the concept of double entry accounting. The accounting equation displays that all assets are either financed through shareholders funds i.e. equity or by borrowing money i.e. liabilities. Thus, the accounting equation is:          $Asset=Liabilities+Equity$

To Prepare:

The table showing the effects of transactions completed by the Ming Chen.

Explanation of Solution

1. Owner invested $60,000 cash in the company along with equipment that had a $15,000 market value.

Assets = Liabilities + Equity

Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables        Payables Capital Withdrawals

+$60,000 + $15,000        $75,000

$60,000 + $15,000 = $75,000

1. The Company paid $1,500 cash for rent of office space for the month.

Assets = Liabilities + Equity

Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables        Payables Capital Withdrawals

$60,000 + $15,000 = $75,000

-$1,500                             -$1,500

$58,500 + $15,000 = $73,500

1. The company purchased $10,000 of additional equipment on credit (payment due within 30 days).

Assets = Liabilities + Equity

Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables        Payables Capital Withdrawals

$58,500 $15,000 = $73,500

+$10,000 +$10,000

$58,500 + $25,000 = $10,000 + $73,500

1. The company completed work for a client and immediately collected the $2,500 cash earned.

Assets = Liabilities + Equity

Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables        Payables Capital Withdrawals

$58,500 $25,000 = $10,000 + $73,500

+$2,500                      +$2,500

$61,000 + $25,000 = $10,000 + $76,000

1. The company completed work for a client and sent a bill for $8,000 to be received within 30 days.

Assets = Liabilities + Equity

Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables        Payables Capital Withdrawals

$61,000 $25,000 = $10,000 + $76,000

+ $8,000                      +$8,000

$61,000 + $8,000 + $25,000 = $10,000 + $84,000

1. The company purchased additional equipment $6,000 for cash.

Assets = Liabilities + Equity

Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables        Payables Capital Withdrawals

$61,000 + $8,000 $25,000 = $10,000 + $84,000

-$6,000 +$6,000

$55,000 + $8,000 + $31,000 = $10,000 + $84,000

1. The company paid an assistant $3000 cash as wages for the month.

Assets = Liabilities + Equity

Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables        Payables Capital Withdrawals

$55,000 + $8,000 $31,000 = $10,000 + $84,000

-$3,000                             -$3,000

$52,000 + $8,000 + $31,000 = $10,000 + $81,000

1. The company collected $5000 cash as a partial payment for the amount owed by the client in transaction e.

Assets = Liabilities + Equity

Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables        Payables Capital Withdrawals

$52,000 + $8,000 $31,000 = $10,000 + $81,000

+$5,000 -$5,000

$57,000 + $3,000 + $31,000 = $10,000 + $81,000

1. The company paid $10,000 cash to settle the liability created in transaction c

Assets = Liabilities + Equity

Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables        Payables Capital Withdrawals

$57,000 + $3,000 $31,000 = $10,000 + $81,000

-$10,000        -$10,000

$47,000 + $3,000 + $31,000 = $81,000

1. Owner withdrew $1,000 cash from the company for personal use

Assets        = Liabilities + Equity

Cash + Accounts + Equipment = Accounts + M Chen's - M Chen's + Revenues - Expenses Receivables        Payables Capital Withdrawals

$47,000 + $3,000 $31,000 = $81,000

-$1,000                      -$1,000

$46,000 + $3,000 + $31,000 = $80,000

Hence, the effects of transactions of Ming Chen are shown in the above tables along with the closing balances after each transaction.