Chapter 2, Problem 3AE

To determine

Ascertain the unknown amount in each of the following situations given.

Explanation of Solution

Transaction analysis:

Transaction analysis is an economic event that causes impact on the value of the assets, liabilities or stockholder’s equity (increase or decrease) in an accounting equation.

Calculate the unknown amount for each of the following situations:

a. Total cash received (1) $4,500

b. Total cash collected from credit customers (2) $15,700.

c. Notes payable repaid during the period (3) $25,000.

d. Goods and services received from suppliers on account (4)  $1,340.

e. Net income, assuming that no dividends were paid (5) $9,000.

Working note:

Calculate the total cash received:

$\begin{array}{c}\text{Cash Received}=\left[\begin{array}{l}\left(\text{Ending balance of Cash}+\text{Cash Disbursed}\right)\\ -\text{Beginning Balance}\end{array}\right]\\ =\left(\$5,250+\$5,400\right)-\$6,100\\ =\$4,550\end{array}$ (1)

Calculate the amount of cash collected from credit customers:

$\begin{array}{c}\text{Cash Received from Credit Customers}\text{=}\left[\begin{array}{l}\left(\begin{array}{l}\text{Beginning Balance }\\ \text{+ Sales on Account}\end{array}\right)\\ -\left(\begin{array}{l}\text{Ending balance of}\\ \text{ Accounts Receivable}\end{array}\right)\end{array}\right]\\ \text{=}\left(\text{\$8,500}\text{+}\text{\$16,500}\right)-\text{\$9,300}\\ \text{=}\text{\$15,700}\end{array}$ (2)

Calculate the amount of notes payable repaid during the period:

$\begin{array}{c}\text{Repayment of Notes Payable}\text{=}\left[\begin{array}{l}\left(\text{Beginning Balance + Borrowing}\right)\\ -\left(\text{Ending balance of Notes Payable}\right)\end{array}\right]\\ \text{=}\left(\text{\$15,000}\text{+}\text{\$30,000}\right)-\text{\$20,000}\\ \text{=}\text{\$25,000}\end{array}$ (3)

Calculate the amount of goods and services received from suppliers on account:

$\begin{array}{c}\left(\begin{array}{l}\text{Goods and Services received }\\ \text{from suppliers on account}\end{array}\right)\text{=}\left[\begin{array}{l}\left(\begin{array}{l}\text{Ending balance of Accounts Payable }\\ \text{ + Payment on Account}\end{array}\right)\\ -\left(\text{Opening balance of Accounts Payable}\right)\end{array}\right]\\ =\left(\$1,720+\$2,900\right)-\$3,280\\ =\$1,340\end{array}$ (4)

Calculate the amount of net income (assuming that no dividends were paid)

$\begin{array}{c}\text{Net Income}\text{=}\left[\begin{array}{l}\text{Ending balance of Stockholders' Equity}\\ -\left(\text{Beginning Balance + Capital Contribution}\right)\end{array}\right]\\ =\$46,000-\left(\$32,000+\$5,000\right)\\ =\$9,000\end{array}$ (5)