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Chapter 1: Q4TI (page 19)

Using the information provided, analyze the effects of Lawlor Lawn Service鈥檚 transactions on the accounting equation. May 1 Received \(1,700 and issued common stock. May 3 Purchased a mower on account, \)1,440. May 5 Performed lawn services for client on account, \(200. May 17 Paid \)60 cash for gas used in mower. May 28 Paid cash dividends of $300.

Short Answer

Expert verified


Assets		=Liabilities
+

EQUITY
Contributed Capital
+Retained Earnings
Cash
+
Accounts Receivable
+
Equipment
=
Accounts Payable
+
Common Stock
-
Dividends
+
Revenues
-Expenses

May 1

+1,700





=



+1,700







Bal.

$1,700





=



$1,700







May 3





+1,440

=

+1,440









Bal.

$1,700



+

$1.440

=

$1,440

+

$1,700







May 5.



+200



=







+200



Bal.

$1,700

+

$200

+

$1,440

=

$1,440


$1,700



+

$200



May 17

-60





=







-60

Bal.

$1,640

+

$200

+

$1,440

=

$1,440

+

$1,700



+

$200

-

$60

May 28

-300





=





-300





Bal.

$1,340

+

$200

+

$1,440

=

$1,440

+

$1,700

-

$300

+

$200

-

$60


$2,980

$2980

Step by step solution

01

Explanation of accounting equation

The accounting equation is the basic tool of accounting, which measures the entity's resources. As per the accounting equation, assets are equal to the sum of liabilities and equity.

02

Effect of the transactions

Transaction on May 1 will increase the cash under the asset and common stock under equity by $1,700.

Transaction on May 3 will increase the equipment under the asset and accounts payable under liabilities by $1,440.

Transaction on May 5 will increase accounts receivable under asset and service revenue under equity.

Transaction on May 17 will decrease cash under the asset and retained earnings under equity by $60.

Transaction on May 28 will decrease cash under the asset and retained earnings under equity by $300.

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Most popular questions from this chapter

Meg McIntyre opened a public relations firm called Pop Chart on August 1, 2018. The following amounts summarize her business on August 31, 2018During September 2018, the business completed the following transactions: a. Received contribution of \(14,000 cash from Meg McIntyre in exchange for common stock. b. Performed service for a client and received cash of \)1,600. c. Paid off the beginning balance of accounts payable. d. Purchased office supplies from OfficeMax on account, \(1,200. e. Collected cash from a customer on account, \)2,300. f. Cash dividends of \(1,500 were paid to stockholders. g. Consulted for a new band and billed the client for services rendered, \)4,000. h. Recorded the following business expenses for the month: Paid office rent: \(900. Paid advertising: \)450. Analyze the effects of the transactions on the accounting equation of Pop Chart using the format presented above.:

Michael McNamee is the proprietor of a property management company,Apartment Exchange, near the campus of Pensacola State College. The business has cash of \(8,000 and furniture that cost \)9,000 and has a marketvalue of \(13,000. The business debts include accounts payable of \)6,000. Michael's personal home is valued at \(400,000, and his personal bank accounthas a balance of \)1,200. Consider the accounting principles and assumptionsdiscussed in the chapter, and identify the principle or assumption that best matches the situation:

a. Michael's personal assets are not recorded on the Apartment Exchange's

balance sheet.

b. The Apartment Exchange records furniture at its cost of \(9,000, not its market

value of \)13,000.

c. The Apartment Exchange reports its financial statements in U.S. dollars.

d. Michael expects the Apartment Exchange to remain in operation for the

foreseeable future

Amos Sharp recently opened his own accounting firm on October 1, which he operates as a corporation. The name of the new entity is Amos Sharp, CPA. Sharp experienced the following events during the organizing phase of the new business and its first month of operations in 2018. Oct. 5 Sharp deposited \(45,000 in a new business bank account titled Amos Sharp, CPA. The business issued common stock to Sharp. 6 Paid \)300 cash for letterhead stationery for new office. 7 Purchased office furniture for the office on account, \(6,500. 10 Consulted with tax client and received \)3,300 for services rendered. 11 Paid utilities, \(340. 12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, \)16,000. 18 Paid office rent, \(1,800. 25 Received amount due from client that was billed on October 12. 27 Paid full amount of Accounts Payable created on October 7. 31 Cash dividends of \)3,800 were paid to stockholders. Requirements 1. Analyze the effects of the events on the accounting equation of Amos Sharp, CPA. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet.

What is the calculation for ROA? Explain what ROA measures

Exeter is a building contractor on the Gulf Coast. After losing a number of big lawsuits, it was facing its first annual net loss as the end of the year approached. The owner, Hank Snow, was under intense pressure from the company鈥檚 creditors to report positive net income for the year. However, he knew that the controller, Alice Li, had arranged a short-term bank loan of $10,000 to cover a temporary shortfall of cash. He told Li to record the incoming cash as 鈥渃onstruction revenue鈥� instead of a loan. That would nudge the company鈥檚 income into positive territory for the year, and then, he said, the entry could be corrected in January when the loan was repaid. Requirements 1. How would this action affect the year-end income statement? How would it affect the year-end balance sheet? 2. If you were one of the company鈥檚 creditors, how would this fraudulent action affect you?

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