4. Basic transaction processing. On November 1 of the current year, Richard Simmons established a sole proprietorship. The following transactions occurred during the month: 1: Simmons invested $3
4. Basic transaction processing. On November 1 of the current year, Richard Simmons established a sole proprietorship. The following transactions occurred during the month:
1: Simmons invested $32,000 into the business for $32,000 in common stock.
2: Paid $5,000 to acquire a used minivan.
3: Purchased $1,800 of office furniture on account.
4: Performed $2,100 of consulting services on account.
5: Paid $300 of repair expenses.
6: Received $800 from clients who were previously billed in item 4.
7: Paid $500 on account to the supplier of office furniture in item 3.
8: Received a $150 electric bill, to be paid next month.
9: Simmons withdrew $800 from the business.
10: Received $250 in cash from clients for consulting services rendered.
a. Arrange the following asset, liability, and owner’s equity elements of the account¬ing equation: Cash, Accounts Receivable, Office Furniture, Van, Accounts Payable, Common Stock/Dividends, and Revenues/Expenses. (See Exhibit 1.5)
b. Record each transaction on a separate line. After all transactions have been recorded, compute the balance in each of the preceding items.
c. Answer the following questions for Simmons.
(1) How much does the company owe to its creditors at month-end? On which financial statement(s) would this information be found?
(2) Did the company have a “good” month from an accounting viewpoint? Briefly explain.
5. Transaction analysis and statement preparation. The transactions that follow
relate to Burton Enterprises for March 20X1, the company’s first month of activity.
3/1 Joanne Burton, the owner, invested $20,000 cash into the business.
3/4 Performed $2,400 of services on account.
3/7 Acquired a small parcel of land by paying $6,000 cash
3/12 Received $500 from a client who was billed previously on March 4.
3/15 Paid $200 to the Journal Herald for advertising expense.
3/18 Acquired 9,000 of equipment from Park Central Outfitters by Paying
$7,000 down and agreeing to remit the balance owed within two weeks (A/P).
3/22 Received $300 cash from clients for services.
3/24 Paid $1,500 on account to Park Central Outfitters in partial settlement of
the balance due from the transaction on March 18.
3/28 Rented a car from United Car Rental for use on March 28. Total charges
amounted to $125, with United billing Burton for the amount due.
3/31 Paid $600 for March wages
Processed a $600 cash withdrawal (dividend) from the business for Joanne Burton
a. Determine the impact of each of the preceding transactions on Burton’s assets,
liabilities, and owner’s equity. See exhibit 1.5. Use the following format:
Assets = Liabilities + Owner’s Equity
Cash, Accounts Receivable, Land, Equipment Accounts Payable (+)Common Stock (+) Revenues
(-) Dividends (-) Expenses
a. Record each transaction on a separate line. Calculate balances only after the last transaction has been recorded.
b. Prepare an income statement, a statement of retained earnings, and a balance sheet, (See Exhibit 1.2, 1.3 and 1.4)