Question

based on this information alone, determine the following for holloway company. (hint: record the events in general ledger accounts under an accounting equation before satisfying the requirements.) note: not all cells require input. enter any decreases to account balances with a minus sign. holloway company effect of events on the year 1 accounting equation event assets = liabilities + stockholders equity cash + accounts receivable = + common stock + retained earnings earned revenue 0 + 18,000 = 0 + 0 + 18,000 collected accounts receivable 14,000 + = 0 + 0 + 0 ending balance 14,000 + 18,000 = 0 + 0 + 18,000

Explanation:

Step1: Analyze earned revenue

When revenue is earned on account, cash doesn't change (0), accounts - receivable increase by 18,000. Liabilities don't change (0), common stock doesn't change (0), and retained earnings increase by 18,000 because revenue increases net income which is part of retained earnings.

Step2: Analyze collected accounts receivable

When collecting accounts - receivable, cash increases by 14,000 and accounts - receivable decreases by 14,000. Liabilities (0), common stock (0), and retained earnings (0) are not affected by the collection of accounts - receivable as it is just a conversion of one asset (accounts - receivable) to another (cash).

Step3: Calculate ending balances

For cash, the ending balance is 14,000 (from the collection). For accounts - receivable, the ending balance is 18,000 (beginning balance from earned revenue) - 14,000 (collected) = 4,000. Liabilities remain at 0, common stock remains at 0, and retained earnings remain at 18,000.

Answer:

Event	Assets		=	Liabilities	+	Stockholders' Equity
Earned revenue	0	18,000		0		0	18,000
Collected accounts receivable	14,000	- 14,000		0		0	0
Ending balance	14,000	4,000		0		0	18,000