Chapter 3, Problem 3.3.1AAP

To determine

Introduction: Each financial transaction or economic event will affect either assets, liabilities, or owners’ equity. Thus, the basis for recording the transaction in the accounting system depends on the accounting equation. The accounting equation is:

  $\text{Assets}\text{=}\text{Liabilities}\text{+}\text{Stockholder's}\text{Equity}$

The Preparation of summary table showing the effect of each transaction on the accounting equation.

Answer to Problem 3.3.1AAP

According to Accounting equation

  $\text{Assets}\text{=}\text{Liabilities}\text{+}\text{Stockholder's}\text{Equity}$

  $\text{Total}\text{Assets}=(\$22,400+\$1,500+\$4,000+350)=\$28,250$

  $\text{Liabilities}\text{and}\text{Stockholders's}\text{equity}=(\$350+\$7,500+\$20,000+\$400)=\$28,250$

Explanation of Solution

The table is prepared as follows:

		Assets =			Liabilities +		Stockholders’ equity
Date/Balance	Cash	Receivables	Supplies	Computer Equipment	Accounts payable	Notes payable	Capital Stock	Retained earnings
3/2	$20,000						$20,000
Bal.	$20,000						$20,000
3/7	$7,500					$7,500
Bal.	$27,500					$7,500	$20,000
3/12			$350		$350
Bal.	$27,500		$350		$350	$7,500	$20,000
3/19		$2,000						$2,000
Bal.	$27,500	$2,000	$350		$350	$7,500	$20,000	$2,000
3/20	-$650							-$650
Bal.	$26,850	$2,000	$350		$350	$7,500	$20,000	$1,350
3/22	$500	-$500
Bal.	$27,350	$1,500	$350		$350	$7,500	$20,000	$1,350
3/26	$1,400							$1,400
Bal.	$28,750	$1,500	$350		$350	$7,500	$20,000	$2,750
3/29	-$4,000			$4,000
Bal.	$24,750	$1,500	$350	$4,000	$350	$7,500	$20,000	$2,750
3/30	-1,650							-$1,650
Bal.	$23,100	$1,500	$350	$4,000	$350	$7,500	$20,000	$1,100
3/31					$700			-$700
	-$700				-$700
Bal.	$22,400	$1,500	$350	$4,000	$350	$7,500	$20,000	$400

Total Assets = $28,250Total Liability and Capital = $28,250