Chapter 4, Problem 4.5.2AAP

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:

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

Adjustments: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses.

The reason why accumulated depreciation − equipment has a balance of $4,000 on June 30, 2017