Problems For Accounting Equation

1. Mandy Arnold started his own consulting firm. Mandy Consulting, on July 01, 2014. The following transactions
occurred during the month of July.
July 01 Mandy invested $8,000 cash in the business.
02 Paid $800 for office rent for the month.
03 Purchased $500 of supplies on account.
05 Paid $50 to advertise in the Times News.
07 Paid $2000 for insurance expense.
09 Received $3,000 cash for service provided.
12 Withdrew $700 cash for personal use.
15 Performed $3,300 of services on account.
17 Paid $3,000 employees salaries.
20 Paid for the supplies purchased on account on July 03.
23 Received a cash payment of $2,000 for service provided on account on July 15.
26 Borrowed $5,000 from the bank on a note payable.
29 Purchased office equipment for $2,400 on account.
30 Paid $150 for utilities.

Instructions:

Show the effects of the previous transactions on the accounting equation using the following format. Include
explanations for any changes in the Mandy Arnold Capital account in your analysis.

Assets Liabilities Owner’s Equity

------------------------------------------------- ------------------------- -------------------------
Date Cash + Accounts+ Supplies+ Office = Notes + Accounts + Mandy Arnold
Receivable Equipment Payable Payable Capital

2. ZayanZoha started his own Studio. Z. Zoha Studio, on July 01, 2015. The following transactions occurred during
the month of July.
July 01 Zoha invested $10,000 cash in the business.
02 Paid $900 for office rent for the month.
03 Purchased supplies $1600 of on account.
05 Paid $150 to advertise in the Times News.
09 Received $5,000 cash for service provided.
12 Withdrew $800 cash for personal use.
15 Performed $6,300 of services on account.
17 Paid $4,000 employees salaries.
20 Paid for the supplies purchased on account on July 03.
23 Received a cash payment of $4,000 for service provided on account on July 15.
26 Borrowed $4,000 from the bank on a notes payable.
29 Purchased Office equipment for $2,400 cash.
30 Paid $250 for utilities.

Instructions:

Prepare a tabular analysis of the transactions.

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3. Mr. X has opened his new business firm on May 01,2013 named “ X Limited” by investing $45,000 cash. The
following information of the company on May 31,2013:

Cash $4,500 Notes Payable $30,000

Accounts Receivable $7,200 Rent Expense $1,200
Equipment $64,000 Repair Expense $400
Revenue $6,600 Fuel Expense $2,500
Advertising Expense $500 Insurance Expense $ 400
Accounts Payable $800

Mr. X withdrew $1,700 in cash for personal use.

Instruction:

Prepare an income statement & owner’s equity statement for the month of May and a balance sheet at May 31,2013.

4. Mr. Z has opened his new business firm on July 01,2013 named “ Z Limited” by investing $26,200 cash. The following
information of the company on July 31,2013:

Cash $10,000 Notes Payable $13,000

Accounts Receivable $4,000 Supplies Expense $1,600
Equipment $25,000 Supplies $2,000
Revenue $5,500 Gas & Oil Expense $800
Advertising Expense $500 Utilities Expense $ 400
Accounts Payable $1,200

Mr. Z withdrew $1,700 in cash for personal use.

Instruction:

Prepare an income statement & owner’s equity statement for the month of July and a balance sheet at July 31,2013.

5. Mr. T has opened his new business firm on March 01,2013 named “ T Limited” by investing $10,000 cash. The
following information of the company on March 31,2013:

Cash $5,180 Revenue $850

Accounts Receivable $730 Salaries Expense $1,000
Equipment $5,000 Supplies $500
Revenue $3100 Rent Expense $400
Advertising Expense $250 Utilities Expense $ 140
Accounts Payable $250
Mr. T withdrew $1,000 in cash for personal use.

Instruction:

Prepare an income statement & owner’s equity statement for the month of March and a balance sheet at March 31,2013.

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 6. Mr. W has opened his new business firm on June 01,2013 named “ W Limited” by investing $10,000 cash. The
following information of the company on June 30,2013:

Cash $8,700
Accounts Receivable $1,650 Salaries Expense $1,000
Equipment $10,000 Supplies $150
Revenue $3900 Rent Expense $500
Advertising Expense $100 Utilities Expense $ 100
Accounts Payable $150 Notes Payable $8,350

Mr. W withdrew $200 in cash for personal use.

Instruction:
Prepare an income statement & owner’s equity statement for the month of June and a balance sheet at June
30,2013.

7. Joan Robinson started his own consulting firm .Joan Robinson on July 01, 2013. The following transactions

occurred during the month of July.

July 01 Joan Robinson invested $10,000 cash in the business.

05 Paid $800 for office rent for the month.
07 Purchased $3,000 of office equipment on account.
10 Provided legal services to clients for cash $1,500.
15 Borrowed $700 from the bank on a note payable.
22 Performed $2,000 of services for client on account.
31 Paid $500 employees salaries, utilities $300 and telephone $100.

Instructions:
a. Show the effects of the previous transactions on the accounting equation using the following format.

Assets Liabilities Owner’s Equity

---------------------------------------------- ---------------------- ---------------------
Date Cash + Accounts+ Supplies+ Office = Notes + Accounts + Joan Robinson
Receivable Equipment Payable Payable Capital

b. Prepare an income statement for the month of July.

c. Prepare an owner’s equity statement for Joan Robinson Consulting for the month ended July 31, 2013.
d. Prepare a balance sheet at July 31, 2013.

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 8. Max De Silva started his own consulting firm, Brave Consulting, on May 01, 2014. The following transactions
occurred during the month of May.

May 01 Max invested $15,000 cash in the business.

03 Paid $600 for office rent for the month.
05 Purchased $3,000 of office equipment for cash..
06 Incurred $700 of advertising cost in the Times News, on account.
07 Paid $800 for office supplies.
11 Earned $11,000 for services rendered: $ 3,000 cash is received from customers
and the balance is billed to customers on account.
15 Withdrew $500 cash for personal use.
18 Paid $2,200 employees salaries.
22 Paid Times News amount due on May 06.
26 Received a cash payment of $4,000 for service provided on account on May 11.
30 Borrowed $5,000 from the bank on a notes payable.
31 Paid for utilities $ 375.

Instruction:

Show the effects of the previous transactions on the accounting equation using the following column headings: Cash,
Accounts Receivable, Supplies, Office Equipment,Notes Payable, Accounts Payable, Max De Silva CapitalInclude
explanations for any changes in the Max De Silva Capital account in your analysis.

*** Reference Book: Principles of Accounting by Kieso, Kimmel and Weygandy( 7 th edition)

Chowdhury Tabassum Shakila

Assistant Professor

Department of Business Administration

Leading University, Sylhet.

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