Option #2: Analyzing the Effect of Transactions Using the Accounting Equation De

Question

Option #2: Analyzing the Effect of Transactions Using the Accounting Equation Detroit Roofing Company began operations in August and completed the following transactions during that first month of operations. August 1 Detroit Roofing Company’s stockholders invested $45,000 cash in the company. 2 The company purchased $25,000 in office equipment. It paid $5,000 in cash and signed a note payable promising to pay the $20,000 over the next three years. 2 The company rented office space and paid $3,000 cash for the August rent. 6 The company installed a new roof for a customer and immediately collected $5,000. 7 The company paid a supplier $2,000 for roofing materials used on the August 6 job. 8 The company purchased a $2,500 copy machine for office use on credit. 9 The company completed work for additional customers on credit in the amount of $16,000. 15 The company paid its employees’ salaries of $2,300 for the first half of the month. 17 The company installed a new roof for a customer and immediately collected $2,400. 20 The company received $10,000 in payments from the customers billed on August 9. 28 The company paid $1,500 on the copy machine purchased on August 8. It will pay the remaining balance in June. 31 The company paid its employees’ salaries of $2,400 for the second half of the month. 31 The company paid a supplier $5,300 for roofing materials used on the remaining jobs completed during August. 31 The company paid $450 cash for this month’s utility bill.

Explanation / Answer

Account Equation :

Assets = Liabilities + Equity

Date Assets = Liabilities + Equity Revenue - Expenses Cash Accounts Receivable Office Equipment Copy Machine Accounts Payable Note Payable Common Stock August 1 45,000 45,000 August 2 (5,000) 25,000 20,000 August 2 (3,000) 3,000 August 6 5,000 5,000 August 7 (2,000) 2,000 August 8 2,500 2,500 August 9 16,000 16,000 August 15 (2,300) 2,300 August 17 2,400 2,400 August 20 10,000 (10,000) August 28 (1,500) (1,500) August 31 (2,400) 2,400 August 31 (5,300) 5,300 August 31 (450) 450 Balances 40,450 6,000 25,000 2,500 1,000 20,000 45,000 23,400 15,450

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