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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

Consider the following accounting terms and definitions, and match each term to the definition:

1. Accounting equation

2. Asset

3. Balance sheet

4. Expense

5. Income statement

6. Liability

7. Net income

8. Net loss

9. Revenue

10. Statement of cash flows

11. Statement of retained

earnings

a. An economic resource that is expected to be of benefit

in the future

b. Debts that are owed to creditors

c. Excess of total expenses over total revenues

d. Excess of total revenues over total expenses

e. The basic tool of accounting, stated as

Assets = Liabilities + Equity

f. Decreases in equity that occur in the course of selling

goods or services

g. Increases in equity that occur in the course of selling

goods or services

h. Reports on a business鈥檚 cash receipts and cash payments

during a period

i. Reports on an entity鈥檚 assets, liabilities, and stockholders鈥�

equity as of a specific date

j. Reports on an entity鈥檚 revenues, expenses, and net

income or loss for the period

k. Reports how the company鈥檚 retained earnings balance

changed from the beginning to the end of the period

Using the expanded accounting equation, solve for the missing amount. Assets $ 71,288 Liabilities 2,260 Common Stock ? Dividends 14,420 Revenues 53,085 Expenses 28,675

You would like to start a cellular telephone equipment service business. You are considering organizing the business as a sole proprietorship. Identify the advantages and disadvantages of owning a sole proprietorship.

Describe the similarities and differences among the four different types of business entities discussed in the chapter.

Indicate the effects of the following business transactions on the accounting equation of Vivian鈥檚 Online Video store. Transaction (a) is answered as a guide. a. Received cash of \(10,000 from issuance of common stock. Answer: Increase asset (Cash); Increase equity (Common Stock) b. Earned video rental revenue on account, \)2,800. c. Purchased office furniture on account, \(300. d. Received cash on account, \)400. e. Paid cash on account, \(100. f. Rented videos and received cash of \)200. g. Paid monthly office rent of \(1,000. h. Paid \)100 cash to purchase office supplies
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