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Chapter 1: 55CP_1 (page 52)

Canyon Canoe Company is a service-based company that rents canoes for use on local lakes and rivers. Amber and Zack Wilson graduated from college about 10 years ago. They both worked for one of the 鈥淏ig Four鈥� accounting firms and became CPAs. Because they both love the outdoors, they decided to begin a new business that will combine their love of outdoor activities with their business knowledge. Amber and Zack decide that they will create a new corporation, Canyon Canoe Company, or CCC for short. The business began operations on November 1, 2018. Nov. 1 Received \(16,000 cash to begin the company and issued common stock to Amber and Zack. 2 Signed a lease for a building and paid \)1,200 for the first month鈥檚 rent. 3 Purchased canoes for \(4,800 on account. 4 Purchased office supplies on account, \)750. 7 Earned \(1,400 cash for rental of canoes. 13 Paid \)1,500 cash for wages. 15 Paid \(50 dividends to stockholders. 16 Received a bill for \)150 for utilities. (Use separate payable account.) 20 Received a bill for \(175 for cell phone expenses. (Use separate payable account.) 22 Rented canoes to Early Start Daycare on account, \)3,000. 26 Paid \(1,000 on account related to the November 3, 2018, purchase. 28 Received \)750 from Early Start Daycare for canoe rental on November 22, 2018. 30 Paid $100 dividends to stockholders. Requirements 1. Analyze the effects of Canyon Canoe Company鈥檚 transactions on the accounting equation. Use the format of Exhibit 1-6, and include these headings: Cash; Accounts Receivable; Office Supplies; Canoes; Accounts Payable; Utilities Payable; Telephone Payable; Common Stock; Dividends; Canoe Rental Revenue; Rent Expense; Utilities Expense; Wages Expense; and Telephone Expense.

Short Answer

Expert verified

Effect of the transaction on the accounting equation is shown as follows:

Assets

=

Liabilities

+

Equity

Contributed Capital

+

Retained Earnings

Cash

+

Accounts Receivable

+

Office Supplies

+

Canoes

Accounts Payable

+

Utilities Payable

+

Telephone Payable

Common Stock

-

Dividends

+

Canoe Rental Revenue

-

Rent Expense

-

Utilities Expense

-

Wages Expense

-

Telephone Expense

Nov 1

+16,000

+16,000

Bal.

$16,000

=

+

$16,000

Nov2

-1,200

-1,200

Bal.

$14,800

=

+

$16,000

-

$1,200

Nov.3

+4,800

+4,800

Bal.

$14,800

+

$4,800

=

$4,800

+

$16,000

-

$1,200

Nov. 4

+750

+750

Bal.

$14,800

+

$750

+

$4,800

=

$5,550

+

$16,000

-

$1,200

Nov.7

+1,400

+1,400

Bal.

$16,200

+

$750

+

$4,800

=

$5,550

+

$16,000

+

$1,400

-

$1,200

Nov.13

-1,500

-1,500

Bal.

$14,700

+

$750

+

$4,800

=

$5,550

+

$16,000

+

$1,400

-

$1,200

-

$1,500

Nov.115

-50

-50

Bal.

$14,650

+

$750

+

$4,800

=

$5,550

+

$16,000

-

$50

+

$1,400

-

$1,200

-

$1,500

Nov.16

+150

-150

Bal.

$14,650

+

$750

+

$4,800

=

$5,550

+

$150

+

$16,000

-

$50

+

$1,400

-

$1,200

-

$150

-

$1,500

Nov20

+175

-175

Bal.

$14,650

+

$750

+

$4,800

=

$5,550

+

$150

+

$175

+

$16,000

-

$50

+

$1,400

-

$1,200

-

$150

-

$1,500

-

$175

Nov.22

+3,000

+3,000

Bal.

$14,650

+

$3,000

+

$750

+

$4,800

=

$5,550

+

$150

+

$175

+

$16,000

-

$50

+

$4,400

-

$1,200

-

$150

-

$1,500

-

$175

Nov26

-1000

-1,000

Bal.

$13,650

+

$3,000

+

$750

+

$4,800

=

$4,550

+

$150

+

$175

+

$16,000

-

$50

+

$4,400

-

$1,200

-

$150

-

$1,500

-

$175

Nov.28

+750

-750

Bal.

$14,400

+

$2,250

+

$750

+

$4,800

=

$4,550

+

$150

-

$175

+

$16,000

-

$50

+

$4,400

-

$1,200

-

$150

-

$1,500

-

$175

Nov.30

-100

-100

Bal.

$14,300

+

$2,250

+

$750

+

$4,800

=

$4,550

+

$150

+

$175

+

$16,000

-

$150

+

$4,400

-

$1,200

-

$150

-

$1,500

-

$175

$22,100

$22,100

Step by step solution

01

Explanation on Transaction Analysis

Trasaction analysis helps in analyzing the effect of business transactions on the accounting equation.

02

Explanation on Accounting Equation

In the accounting equation, left side equals $22,100 and right side equals $22,100, which satisfies the accounting equation rule.

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