
Concept explainers
a.
Calculate the amount of
a.

Explanation of Solution
Retained earnings:
Retained earnings are the portion of earnings kept by the business for the purpose of reinvestments, payment of debts, or for future growth.
The amount of retained earnings is calculated as follows:
Assets | = | Liabilities | + | |||
Cash | = | Note Payable | + | Common Stock | + | Retained Earnings |
$156,000 | = | $85,600 | + | $52,400 | + | $18,000 (1) |
Table (1)
Working note 1:
Calculate the value of retained earnings:
b.
Create an
b.

Explanation of Solution
Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:
Create an accounting equation by recording the beginning account balance under appropriate elements:
Company P | |||||||
Effect of 2014 Transactions on the Accounting Equation | |||||||
Event | Assets | = | Liabilities | + | Stockholders’ Equity | ||
Cash | = | Notes Payable | + | Common Stock | + | Retained Earnings | |
Beginning Balances | $156,000 | = | $85,600 | + | $52,400 | + | $18,000 |
Table (2)
c.
Recording the revenue, expense, and dividend events under the appropriate elements of the
c.

Explanation of Solution
Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:
Accounting equation is created and the beginning account balances of each account, revenue, expense, and dividend events are recorded in the following manner:
Company P | |||||||
Effect of 2014 Transactions on the Accounting Equation | |||||||
Event | Assets | = | Liabilities | + | Stockholders’ Equity | ||
Cash | = | Notes Payable | + | Common Stock | + | Retained Earnings | |
Beginning Balances | $156,000 | = | $85,600 | + | $52,400 | + | $18,000 |
1. Earned Revenue | $36,000 | = | NA | + | NA | + | $36,000 |
2. Paid expenses | ($20,000) | = | NA | + | NA | + | ($20,000) |
3. Paid dividend | ($3,000) | = | NA | + | NA | + | ($3,000) |
Ending Balance | $169,000 | = | $85,600 | + | $52,400 | + | $31,000 |
Table (2)
d.
Prove the equality of the
d.

Explanation of Solution
Prove the equality of the accounting equation:
Cash ($) | = | Note Payable ($) | + | Common Stock ($) | + | Retained earnings ($) |
169,000 | 85,600 | 52,400 | 31,000 |
Table (4)
Therefore, the equality of the
e.
Identify the beginning and ending balances in the cash and common stock accounts and explain the reason for the beginning and ending balances of cash account being different while the beginning and ending balances of common stock being same.
e.

Explanation of Solution
Cash: Cash represents the cash reserves available with the company at a point of time.
Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend
The reason for the beginning and ending balances of cash account being different and the beginning and ending balances of common stock being same is explained as follows:
The cash account had the beginning and the ending balance of $156,000 and $169,000 respectively. The common stock account had beginning balance of $52,400 and this was not changed during the period. The accounting events of Company P during the 2015 affected only the cash account and did not affect the common stock account.
Want to see more full solutions like this?
Chapter 1 Solutions
Survey Of Accounting
- please don't use AI tool.arrow_forwardincoporate the accounting conceptual frameworksarrow_forwarda) Define research methodology in the context of accounting theory and discuss the importance of selecting appropriate research methodology. Evaluate the strengths and limitations of quantitative and qualitative approaches in accounting research. b) Assess the role of modern accounting theories in guiding research in accounting. Discuss how contemporary theories, such as stakeholder theory, legitimacy theory, and behavioral accounting theory, shape research questions, hypotheses formulation, and empirical analysis. Question 4 Critically analyse the role of financial reporting in investment decision-making, emphasizing the qualitative characteristics that enhance the usefulness of financial statements. Discuss how financial reporting influences both investor confidence and regulatory decisions, using relevant examples.arrow_forward
- Fastarrow_forwardCODE 14 On August 1, 2010, Cheryl Newsome established Titus Realty, which completed the following transactions during the month: a. Cheryl Newsome transferred cash from a personal bank account to an account to be used for the business in exchange for capital stock, $25,000. b. Paid rent on office and equipment for the month, $2,750. c. Purchased supplies on account, $950. d. Paid creditor on account, $400. c. Earned sales commissions, receiving cash, $18,100. f. Paid automobile expenses (including rental charge) for month, $1,000, and miscel- laneous expenses, $600. g. Paid office salaries, $2,150. h. Determined that the cost of supplies used was $575. i. Paid dividends, $2,000. REQUIREMENTS: 1. Determine increase - decrease of each account and new balance 2. Prepare 3 F.S: Income statement; Retained Earnings Statement; Balance Sheet Scanned with CamScannerarrow_forwardAssume that TDW Corporation (calendar-year-end) has 2024 taxable income of $952,000 for purposes of computing the §179 expense. The company acquired the following assets during 2024: (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Asset Machinery Computer equipment Furniture Total Placed in Service September 12 February 10 April 2 Basis $ 2,270,250 263,325 880,425 $ 3,414,000 b. What is the maximum total depreciation, including §179 expense, that TDW may deduct in 2024 on the assets it placed in service in 2024, assuming no bonus depreciation? Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Maximum total depreciation deduction (including §179 expense)arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





