3rd Edition

ISBN: 9780133791129

Author: Jane L. Reimers

Publisher: Pearson Higher Ed

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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 3, Problem 64PA

Transactions for Pops Company for 2011 were as follows:

a. The owners started the business as a corporation by contributing $30,000 cash in exchange for common stock.
b. The company purchased office equipment for $8,000 cash and land for $15,000 cash.
c. The company earned a total of $22,000 of revenue of which $16,000 was collected in cash.
d. The company purchased $890 worth of supplies for cash.
e. The company paid $6,000 in cash for other operating expenses.
f. At the end of the year, the company owed employees $2,480 for work that the employees had done in 2011. The next payday, however, is not until January 4, 2012.
g. Only $175 worth of supplies was left at the end of the year.

The office equipment was purchased on January 1 and is expected to last for eight years (straight-line depreciation, no salvage value).

Requirements

1. Use an accounting equation worksheet to record the transactions that occurred during 2011.
2. Record any needed adjustments at year end.
3. Prepare the income statement, statement of changes in shareholders’ equity, and the statement of cash flows for the year ended December 31, 2011, and the balance sheet at December 31, 2011.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Chapter 3, Problem 63PA

Chapter 3, Problem 65PA

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Solution Summary: The author explains accounting equation as an accounting tool expressed in the form of equation, by creating a relation between resources or assets of the business and claims on the resources by creditors, and the owners.

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