4-36 L. Snider, a young CPA, started Snider Accounting Services on September I.
ID: 2424042 • Letter: 4
Question
4-36 L. Snider, a young CPA, started Snider Accounting Services on September I. During September, the following transactions of the company took place: (a) On September I, Snider invested $7,000 to start the business. (b) On September I, the company paid $3,000 for one year's rent of office space in advance n be, fie equipment was purchased at a cast of $5,0. A down payment (c) On September 2, office equipment was purchased at a cost of $5,000. A down payment of $1,000 was made, and a $4,000, one-year note was signed for the balance owed. (d) On September 5, office supplies were purchased for $600 cash. (e) On September 18, $1,000 was collected from clients for accounting services performed. (f) On September 28, a $500 salary was paid to an accounting assistant. () On September 28, a 5500 salary was paid to an accounting assitant.Explanation / Answer
Answer
Answer (1) Recording of Transactions
(a) September 1
Cash A/c Dr. $ 7,000
To Capital A/c Cr. $ 7,000
(b) September 1,
Office Rent A/c Dr. $ 3,000
To Cash A/c Cr. $ 3,000
(c) September 2,
Equipment A/c dr. $ 5,000
To Cash A/c Cr. $ 1,000
To note payable A/c Cr. $ 4,000
(d) September 5,
Office Supplies A/c Dr $ 600
To Cash A/c Cr. $ 600
(e) September 18,
Cash A/c dr. $ 1,000
To Revenue from services A/c Cr. $ 1,000
(f) September 28,
Salary A/c Dr. $ 500
To Cash A/c Cr. $ 500
(g) September 29,
Capital A/c Dr. $ 800
To Cash A/c Cr. $ 800
(h) September 30,
Receivables A/c Dr. $ 1200
To Revenue from Services A/c Cr. $ 1200
(i) September 30,
Utilities Expense A/c dr. $ 100
To Utilities Payable A/c Cr. $ 100
(j) September 30,
(1) Office Rent paid in Advance A/c Dr. $ 2750 (3,000 * 11/12)
To Office Rent A/c Cr. $ 2750 (3,000 * 11/12)
(2) Depreciation A/c Dr. $ 60
To Office Equipment A/c Cr. $ 60
(3) Interest expense A/c dr. $ 40
To Interest on note payable A/c Cr. $ 40
(4) Office Supplies Expense A/c dr. $ 50
To Office Supplies A/c Cr. $ 50
Answer 2
Equality of accounting equation
Equity + outside liabilities = Assets
Capital ( $ 6200) + Net income ( $ 1200) + Note payable ( $ 4000) + Utilities Payable ( $ 100) + Interest on note payable ( $ 40) = Equipment ( $ 4940) + Receivables ( $ 1200) + Office Supplies ( $ 550) + Cash ( $ 2100) + Office rent paid in advance ( $ 2750)
Answer (3)
Net income Statement of Snider Accounting Services for month of September
Figures in $
Particulars
Amount
Revenue
Revenue From Services
a
2200
1000+1200
Expenses
Office Supplies Expense
b
50
Office Rent Expense
c
250
3000-2750
Salary Expense
d
500
Utilities Expenses
e
100
Depreciation on equipment
f
60
Interest expense
g
40
Net income (a-b-c-d-e-f-g)
1200
Answer (4)
Balance Sheet of Snider Accounting Services as on September 30
Figures in $
Liabilities
Amount
Assets
Amount
Capital
6200
7000-800
Equipment
4940
5000-60
Net income
1200
Receivables
1200
Office supplies
550
600-50
Note payable
4000
Cash
2100
7000-3000-1000-600+1000-500-800
Utilities Payable
100
Interest on note payable
40
Office rent paid in advance
2750
11540
11540
Net income Statement of Snider Accounting Services for month of September
Figures in $
Particulars
Amount
Revenue
Revenue From Services
a
2200
1000+1200
Expenses
Office Supplies Expense
b
50
Office Rent Expense
c
250
3000-2750
Salary Expense
d
500
Utilities Expenses
e
100
Depreciation on equipment
f
60
Interest expense
g
40
Net income (a-b-c-d-e-f-g)
1200
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