4th Edition

ISBN: 9781337669450

Author: Rich

Publisher: Cengage

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The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…

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Textbook Question

Chapter 2, Problem 39E

Exercise 2-39 Transaction Analysis OBJECTIVE e

The following events occurred for Parker Company.

Performed consulting services for a client in exchange for $3,200 cash.
Performed consulting services for a client on amount. $1,700.
Paid $30,000 cash for land.
Purchased office supplies on accounts $900.
Paid a $2,500 cash dividend to stockholders.
Paid $550 on account for supplies purchased in Transaction d.
Paid $800 cash for the current month’s rent.
Collected $1,500 from client in Transaction b.
Stockholders invested $20,000 cash in the business.

Required:

1. Analyze the effect of each transaction on the accounting equation. For example, if salaries of $500 were paid. the answer would be “Decrease in stockholders’ equity (expense) $500 and decrease in assets (cash) $500.

2. CONCEPTUAL CONNECTION For Event 6, what accounting principle did you use to determine the amount to be recorded for supplies?

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Chapter 2, Problem 38E

Chapter 2, Problem 40E

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Chapter 2 Solutions

Cornerstones of Financial Accounting

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Solution Summary: The author explains the accounting equation that the assets must be equal to the liabilities and stockholders' equity on the occurrence of a business transaction.

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