QUESTION IMAGE
Question
part three—determining how transactions change an accounting equation
claudia arellano is starting arellano consulting services, a small service business. arellano consulting services uses the accounts shown in the following accounting equation. use the form below to record the following transactions. use a plus sign (+) to indicate an increase and a minus sign (-) to indicate a decrease. calculate new balances for all accounts after each transaction.
transactions
- received cash from owner as an investment, $15,000.00.
- paid cash for insurance, $5,000.00.
- bought supplies on account from lees supplies, $1,600.00.
- paid cash on account to lees supplies, 1,000.00.
- received cash from sales, $2,500.00.
- sold services on account to jones computers, $3,500.00.
| transaction no. | assets | = liabilities + owners equity | ---- | ---- | ---- | cash + accts. rec. jones computers + supplies + prepaid insurance | accts. pay. lees supplies + claudia arellano, capital | beg. bal. | $0 + $0 + $0 + $0 | $0 + $0 | 1 | new bal. | 2 | new bal. | 3 | new bal. | 4 | new bal. | 5 | new bal. | 6 | new bal. |
Step1: Record Transaction 1
Cash: $\$0 + \$15,000 = \$15,000$
Claudia Arellano, Capital: $\$0 + \$15,000 = \$15,000$
All other accounts remain $\$0$.
Step2: Record Transaction 2
Cash: $\$15,000 - \$5,000 = \$10,000$
Prepaid Insurance: $\$0 + \$5,000 = \$5,000$
All other accounts stay unchanged.
Step3: Record Transaction 3
Supplies: $\$0 + \$1,600 = \$1,600$
Accts. Pay. Lee's Supplies: $\$0 + \$1,600 = \$1,600$
All other accounts stay unchanged.
Step4: Record Transaction 4
Cash: $\$10,000 - \$1,000 = \$9,000$
Accts. Pay. Lee's Supplies: $\$1,600 - \$1,000 = \$600$
All other accounts stay unchanged.
Step5: Record Transaction 5
Cash: $\$9,000 + \$2,500 = \$11,500$
Claudia Arellano, Capital: $\$15,000 + \$2,500 = \$17,500$
All other accounts stay unchanged.
Step6: Record Transaction 6
Accts. Rec. Jones Computers: $\$0 + \$3,500 = \$3,500$
Claudia Arellano, Capital: $\$17,500 + \$3,500 = \$21,000$
All other accounts stay unchanged.
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| Transaction No. | Cash | Accts. Rec. Jones Computers | Supplies | Prepaid Insurance | Accts. Pay. Lee's Supplies | Claudia Arellano, Capital |
|---|---|---|---|---|---|---|
| 1 | $+\$15,000$ | $\$0$ | $\$0$ | $\$0$ | $\$0$ | $+\$15,000$ |
| New Bal. | $\$15,000$ | $\$0$ | $\$0$ | $\$0$ | $\$0$ | $\$15,000$ |
| 2 | $-\$5,000$ | $\$0$ | $\$0$ | $+\$5,000$ | $\$0$ | $\$0$ |
| New Bal. | $\$10,000$ | $\$0$ | $\$0$ | $\$5,000$ | $\$0$ | $\$15,000$ |
| 3 | $\$0$ | $\$0$ | $+\$1,600$ | $\$0$ | $+\$1,600$ | $\$0$ |
| New Bal. | $\$10,000$ | $\$0$ | $\$1,600$ | $\$5,000$ | $\$1,600$ | $\$15,000$ |
| 4 | $-\$1,000$ | $\$0$ | $\$0$ | $\$0$ | $-\$1,000$ | $\$0$ |
| New Bal. | $\$9,000$ | $\$0$ | $\$1,600$ | $\$5,000$ | $\$600$ | $\$15,000$ |
| 5 | $+\$2,500$ | $\$0$ | $\$0$ | $\$0$ | $\$0$ | $+\$2,500$ |
| New Bal. | $\$11,500$ | $\$0$ | $\$1,600$ | $\$5,000$ | $\$600$ | $\$17,500$ |
| 6 | $\$0$ | $+\$3,500$ | $\$0$ | $\$0$ | $\$0$ | $+\$3,500$ |
| New Bal. | $\$11,500$ | $\$3,500$ | $\$1,600$ | $\$5,000$ | $\$600$ | $\$21,000$ |
Final Accounting Equation Check:
$\text{Assets} = \$11,500 + \$3,500 + \$1,600 + \$5,000 = \$21,600$
$\text{Liabilities + Owner's Equity} = \$600 + \$21,000 = \$21,600$
The equation remains balanced.