Accounting Exercise 1.2 (Introduction to Accounting)
Required:
Identify each of the following unrelated events as asset source, asset use, or asset exchange transaction. Some events may not be recordable under current accounting rules. In this case, classify the event as Not Applicable (n/a). Also for each event, indicate whether total assets will increase, decrease, or remain unchanged. Use the table format below for your answer:
| Event |
Type of Event |
Effect on Total |
Explanations |
| a |
Asset Source |
Increase |
Increase in assets (Cash) and equity (Contributed Capital) |
| ... |
... |
... |
... |
The list of events is presented below:
a) Started an accounting consulting firm when the business acquired a
cash contribution from owners;
b) Borrowed cash from a local bank;
c) Purchased supplies with cash;
d) Planned a purchase of new office equipment;
e) Traded a used car for a computer. Both assets had identical value;
f) Used supplies in the process of rendering services to customers;
g) Agreed to represent a client in a Tax Administration audit. The owner
will be paid when the audit is complete;
h) Received cash for the service provided to customers;
i) Paid employees salaries in cash;
j) Repaid a bank loan with cash;
k) Paid interest to the bank with cash;
l) Transferred cash from its checking account to a money market account;
m) Sold land for $15,000 cash. The land originally cost $15,000;
n) Distributed cash to the owners;
o) Learnt that a financial analyst determined the company's debt-to-equity
ratio to be 40%.
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