castillo9013
Mar 2, 2010, 10:52 PM
Leora Diamond began a professional practice on June 1 and plans to prepare financial statements at the
end of each month. During June, Diamond (the owner) completed these transactions:
a. Owner invested $70,000 cash along with equipment that had a $20,000 market value in exchange for
common stock.
b. Paid $2,000 cash for rent of office space for the month.
c. Purchased $25,000 of additional equipment on credit (payment due within 30 days).
d. Completed work for a client and immediately collected the $3,000 cash earned.
e. Completed work for a client and sent a bill for $9,500 to be received within 30 days.
f. Purchased additional equipment for $5,000 cash.
g. Paid an assistant $3,500 cash as wages for the month.
h. Collected $6,500 cash as a partial payment for the amount owed by the client in transaction e.
I. Paid $25,000 cash to settle the liability created in transaction c.
j. Paid $1,500 cash dividends to the owner.
Required
Create a table like the one in Exhibit 1.9, using the following headings for columns: Cash; Accounts
Receivable; Equipment; Accounts Payable; Common Stock; Dividends; Revenues; and Expenses. Then
use additions and subtractions to show the effects of the transactions on individual items of the accounting
equation. Show new balances after each transaction.
end of each month. During June, Diamond (the owner) completed these transactions:
a. Owner invested $70,000 cash along with equipment that had a $20,000 market value in exchange for
common stock.
b. Paid $2,000 cash for rent of office space for the month.
c. Purchased $25,000 of additional equipment on credit (payment due within 30 days).
d. Completed work for a client and immediately collected the $3,000 cash earned.
e. Completed work for a client and sent a bill for $9,500 to be received within 30 days.
f. Purchased additional equipment for $5,000 cash.
g. Paid an assistant $3,500 cash as wages for the month.
h. Collected $6,500 cash as a partial payment for the amount owed by the client in transaction e.
I. Paid $25,000 cash to settle the liability created in transaction c.
j. Paid $1,500 cash dividends to the owner.
Required
Create a table like the one in Exhibit 1.9, using the following headings for columns: Cash; Accounts
Receivable; Equipment; Accounts Payable; Common Stock; Dividends; Revenues; and Expenses. Then
use additions and subtractions to show the effects of the transactions on individual items of the accounting
equation. Show new balances after each transaction.