Accounting Equation : Accounting equation refers to the equation which is based on the double entry system of accounting. This implies that if there is a change in the assets of the entity, there will be a corresponding effect on the liabilities or owner’s equity of the entity also. The accounting equation is as follows: Assets = Liabilities + Owner's Equity Assets: Assets refer to those resources that an organization owns, against which the organization derives a value in the future. Liabilities: Liabilities refer to the debts owed by an organization towards the parties from whom the amounts are borrowed. Owner’s Equity: Owner’s equity refers to an amount raised from the public in order to finance the business of a company. The equity holders are referred to as the owners of the business. To Determine: The effect of given transactions on the basic accounting equation.

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Chapter 1, Problem 16Q

To determine

Accounting Equation: Accounting equation refers to the equation which is based on the double entry system of accounting. This implies that if there is a change in the assets of the entity, there will be a corresponding effect on the liabilities or owner’s equity of the entity also. The accounting equation is as follows:

Assets=Liabilities+Owner's Equity

Assets: Assets refer to those resources that an organization owns, against which the organization derives a value in the future.

Liabilities: Liabilities refer to the debts owed by an organization towards the parties from whom the amounts are borrowed.

Owner’s Equity: Owner’s equity refers to an amount raised from the public in order to finance the business of a company. The equity holders are referred to as the owners of the business.

To Determine: The effect of given transactions on the basic accounting equation.

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Selected comparative financial statements of Korbin Company follow. Sales KORBIN COMPANY Comparative Income Statements For Years Ended December 31 2021 2020 $ 512,008 $ 392,240 2019 $ 272,200 Cost of goods sold 308,229 245,542 174,208 Gross profit 203,779 146,698 97,992 Selling expenses 72,705 54,129 35,930 Administrative expenses 46,081 34,517 22,593 Total expenses 118,786 88,646 58,523 Income before taxes .84,993 58,052 39,469 Income tax expense 15,809 11,901 8,012 Net income $ 69,184 $ 46,151 $ 31,457 KORBIN COMPANY Comparative Balance Sheets Assets Current assets Long-term investments Plant assets, net Total assets Liabilities and Equity Current liabilities Common stock Other paid-in capital Retained earnings December 31 2021 2020 2019 $ 54,370 0 $ 36,390 600 $ 48,645 3,870 99,436 90,776 53,339 Total liabilities and equity $ 153,806 $ 127,766 $ 105,854 $ 22,456 $ 19,037 $ 18,524 68,000 68,000 50,000 8,500 8,500 5,556 54,850 32,229 31,774 $ 153,806 $ 127,766 $ 105,854