300,000 Begin Owners Equity - + Investment 135,000 +/- Profit/loss (40,000) - Draw 395,000 End Owners Equity 2022 2023 2024 J Kerkan Capital, January 1 - 68,000 65,000 + Investment 50,000 - 20,000 +/- Profit/loss 25,000 30,000 17,000 - Draw (7,000) (33,000) (12,000) Ending Balance 68,000 65,000 90,000 Has there been a change to the assets, liabilties, or owners' equity? 1 This is a transaction that should be recorded in the accounts as there has been an exchange of assets. Cash was reduced and equipment was increased. The historical cost of $10,000 should be used when recording this transaction.
2 This is a transaction that should be recorded in the accounts as there has been an exchange of assets. Cash was reduced and equipment was increased. The transaction is to be recorded in Canadian funds to follow the monetary unit concept, so the amount that should be used when recording this transaction is $5,200
3 This is a transaction that should be recorded in the accounts because a performance obligation has been completed related to a contract with a customer and accounts receivable should be increased as the company now has a right to payment. The amount of $4,000 should be used when recording this transaction.
4 This is not a transaction as an exchange has not yet occurred
5 This is a transaction that should be recorded in the accounts because an asset (cash) has increased and a liability (unearned revenue) has increased. The company has an obligation to perform services for the customer at a future date. The amount of $4,000 should be used when recording this transaction (a) 1 Owner invested $18,000 cash and equipment with the fair value of $6,000 in the business. 2 Purchased equipment for $8,000, paying $4,000 in cash with the balance of $4,000 on account. 3 Prepaid for insurance for $750 cash 4 Earned $8,300 in service revenue, receiving $3,500 cash with the remaining $4,800 on account. 5 Paid $2,000 cash on accounts payable. 6 B. Star withdrew $3,300 cash for personal use. 7 Paid $800 cash for rent for the month of July. 8 Collected $1,350 cash from customers on account. 9 Paid salaries of $2,700. 10 Incurred $420 of utilities expense on account.
b. In preparing the financial statements, the first statement to be prepared is the income statement. The profit figure is used in the statement of owner's equity to calculate the ending balance of capital. The balance sheet is then completed, using the balance of capital as calculated in the statement of owner's equity.
Taking It Further: The balance sheet, which is sometimes referred to as the statement of financial position, reports balances at a specific point in time - as of the last day of the reporting period. The income statement reports the
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