Chapter 2 Exercise: Instructions: Record the impact of the following transaction

Question

Chapter 2 Exercise: Instructions: Record the impact of the following transactions on the Basic Accounting Equation and Cash Flows for a company that began operations on 1/1/2018 1) Provided services and received cash- $3,000. 2) Paid $450 in advance to rent a storage space for 6 months. 3) Performed $2,500 of services on account. 4) Accrued $800 of wages to be paid later. 5) Received $1,200 in advance for a 1 year service revenue contract. 6) Used cash to purchase Equipment- Cost; $2,000, Salvage Value: $200; Useful Life; 6 years. 7) Adjust the records to record the expiration of 4 months of rent on the storage space (Step #2). 8) Earned 2 months of the service contract (Step #5). Record the adjusting entry. 9) Adjust the records to record 4 months of depreciation on the Equipment. 10) Collected $1,700 from customers on account. See table on next page

Explanation / Answer

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Balance Sheet Income Statement Event Asset = Liabilities + Equity Cash Account Receivable Prepaid Rent Equipment (Depreciation) Bond Payale Unearned Revenue Wages Payable + Retained Eaning Revenue - Expense = Net Income Cash Flow 1 3000 $3,000 $3,000 2 -$450 $450 -$450 3 $2,500 $2,500 4 $800 $800 5 $1,200 $1,200 $1,200 6 -$2,000 $2,000 -$2,000 7 -$300 $300 8 -$200 $200 9 $100 $100 10 $1,700 -$1,700 $1,700 Balance $3,450 $800 $150 $2,000 $100 $1,000 $800 $4,500 $5,700 $1,200 $4,500 $3,450 $6,300 $6,300

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