Question

Transactions: 1. The owner invested $3,000.00 cash in the business. 2. Paid $1,200.00 for insurance for the next year. 3. Purchased supplies from Seiler Supply for $800.00 on account. 4. Purchased $500.00 of supplies from Miles Company. Agreed to pay Miles next month for these supplies. 5. Paid $400.00 to Seiler Supply on account. 6. Ellie VonSpreecken invested an additional $1,000.00 in the business. Instructions: For each transaction, complete the following. Transaction 1 is given as an example. a. Analyze the transaction to determine which accounts in the accounting equation are affected. b. Write the amount in the appropriate columns using a plus (+) if the account increases or a minus (-) if the account decreases. c. Calculate the new balance for each account in the accounting equation. d. Before going on to the next transaction, determine that the accounting equation is still in balance.​

Answer 1

a. Transaction 1:

Accounts affected: Cash (Assets) and Owner's Equity.

b.

Cash (+) $3,000.00

Owner's Equity (+) $3,000.00

c.

Cash = $3,000.00

Owner's Equity = $3,000.00

d. The accounting equation is still in balance:

Assets (Cash) = Liabilities (None) + Owner's Equity (Owner's investment of $3,000.00)

a. Transaction 2:

Accounts affected: Prepaid Insurance (Assets) and Cash (Assets).

b.

Prepaid Insurance (+) $1,200.00

Cash (-) $1,200.00

c.

Prepaid Insurance = $1,200.00

Cash = $1,800.00

d. The accounting equation is still in balance:

Assets (Cash + Prepaid Insurance) = Liabilities (None) + Owner's Equity (Owner's investment of $3,000.00)

a. Transaction 3:

Accounts affected: Supplies (Assets) and Accounts Payable (Liabilities).

b.

Supplies (+) $800.00

Accounts Payable (+) $800.00

c.

Supplies = $800.00

Accounts Payable = $800.00

d. The accounting equation is still in balance:

Assets (Cash + Prepaid Insurance + Supplies) = Liabilities (Accounts Payable) + Owner's Equity (Owner's investment of $3,000.00)

a. Transaction 4:

Accounts affected: Supplies (Assets) and Accounts Payable (Liabilities).

b.

Supplies (+) $500.00

Accounts Payable (+) $500.00

c.

Supplies = $1,300.00

Accounts Payable = $1,300.00

d. The accounting equation is still in balance:

Assets (Cash + Prepaid Insurance + Supplies) = Liabilities (Accounts Payable) + Owner's Equity (Owner's investment of $3,000.00)

a. Transaction 5:

Accounts affected: Accounts Payable (Liabilities) and Cash (Assets).

b.

Accounts Payable (-) $400.00

Cash (-) $400.00

c.

Accounts Payable = $900.00

Cash = $1,400.00

d. The accounting equation is still in balance:

Assets (Cash + Prepaid Insurance + Supplies) = Liabilities (Accounts Payable) + Owner's Equity (Owner's investment of $3,000.00)

a. Transaction 6:

Accounts affected: Cash (Assets) and Owner's Equity.

b.

Cash (+) $1,000.00

Owner's Equity (+) $1,000.00

c.

Cash = $2,400.00

Owner's Equity = $4,000.00

d. The accounting equation is still in balance:

Assets (Cash + Prepaid Insurance + Supplies) = Liabilities (Accounts Payable) + Owner's Equity (Owner's investment of $4,000.00)