Answer to Question #213454 in Accounting for zuby

Question

Lakewood Personal Finance Company,

May 1Received USD 300,000 cash for shares of capital stock issued when company was organized.

1. Accounting and its use in business decisions

2 The company borrowed USD 40,000 from the bank on a note.

7 The company bought USD 182,400 of computer equipment for cash.

11 Cash received for services performed to date was USD 15,200.

14 Services performed for a customer who agreed to pay within a month were USD 10,000.

15 Employee wages were paid, USD 13,200.

19 The company paid USD 14,000 on the note to the bank.

31 Interest paid to the bank for May was USD 140. (Interest is an expense, which reduces retained earnings.)

31 The customer of May 14 paid USD 3,200 of the amount owed to the company.

31 An order was received from a customer for services to be rendered next week, which will be billed at USD

12,000.

. Determine balances after each transaction to show that the accounting equation balances.

Answer 1

The accounting equation implies that Assets=Capital+Liabilities

The balances are shown in the ledger, at times, there is an increase in one item like assets or liabilities but this has zero net balance implying balance.

May 1 Dr Cash/Bank $300,000

Cr Capital $300,000

May 2 Dr Bank $40,000

Cr Notes Payable $40,000

May 7 Dr Equipment $182,400

Cr Cash $182,400

May 11 Dr Cash $15,200

Cr Debtors $15,200

May 14 Dr Debtors $10,000

Cr Retained Earnings $10,000

May 15 Dr Retained Earnings $13,200

Cr Cash $13,200

May 19 Dr Notes Payable $14,000

Cr Cash $14,000

May 31 Dr Retained Earnings $140

Cr Bank $140

May 31 Dr Work in progress $12,000

Cr Debtor $12,000