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International Accounting Essay

1831 words - 8 pages

Chapter 02 - Investing and Financing Decisions and the Accounting System

HANDOUT 2 – 1 SOLUTION, continued ANALYZING TRANSACTIONS
Analyze each of the following transactions of World Wide Webster by performing each of the following. Then, use the chart on the following page to keep track of the amount in each account: (a) Stockholder invests $10,000 into the business in exchange for 10,000 shares of $1 par value common stock. 1. Decide if a transaction took place. 2. Identify the accounts affected. 3. Classify each account affected. 4. Identify direction and amount. 5. Ensure the accounting equation is in balance. Yes – received cash and gave stock. Cash and Common Stock Cash is an Asset (A) ...view middle of the document...

“On credit” (or “on account”) means that you receive the supplies now, and pay for them later. 1. 2. 3. 4. 5. Decide if a transaction took place. Identify the accounts affected. Classify each account affected. Identify direction and amount. Ensure the accounting equation is in balance. Yes – received supplies and obligated to pay for them. Supplies and Accounts Payable Supplies is an Asset (A) and Accounts Payable is a Liability (L) Supplies (A) + $300 and Accounts Payable (L) + $300. Yes – see below.

(e) Sign contract for first website design for $10,000. 1. 2. 3. 4. 5. Decide if a transaction took place. Identify the accounts affected. Classify each account affected. Identify direction and amount. Ensure the accounting equation is in balance. No – no exchange took place.

Chart
Assets Ref. Cash = Liabilities Accounts + Payable Notes Payable +15,000 +300 300 15,000 $15,300 10,000 $10,000 + + Stockholders’ Equity Common Stock +10,000

+ Supplies + Equipment = = = +20,000 = = 20,000

(a) +10,000 (b) +15,000 (c) –20,000 (d) Total 5,000

+300 300 $25,300

2-2
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 02 - Investing and Financing Decisions and the Accounting System

HANDOUT 2 – 2 SOLUTION ANALYZING TRANSACTIONS
Analyze each of the following transactions of World Wide Webster by performing each of the following. Then, use the chart on the following page to keep track of the amount in each account: (f) Company pays off $300 Accounts Payable. 1. Decide if a transaction took place. 2. Identify the accounts affected. 3. Classify each account affected. 4. Identify direction and amount. 5. Ensure the accounting equation is in balance. Yes – paid cash to reduce accounts payable. Cash and Accounts Payable Cash is an Asset (A) and Accounts Payable is a Liability (L) Cash (A) – $300 = Liabilities (L) – $300 Yes – see below.

(g) Company pays for and receives $600 worth of supplies. 1. Decide if a transaction took place. 2. Identify the accounts affected. 3. Classify each account affected. 4. Identify direction and amount. 5. Ensure the accounting equation is in balance. Yes – paid cash to purchase supplies. Cash and Supplies Cash is an Asset (A) and Supplies is an Asset Cash (A) – $600 and Supplies (A) + $600. Yes - see below.

(h) Company acquires and receives $1,000 worth of equipment. 1. Decide if a transaction took place. 2. Identify the accounts affected. 3. Classify each account affected. 4. Identify direction and amount. 5. Ensure the accounting equation is in balance. Yes – paid cash to purchase equipment Cash and Equipment Cash is an Asset (A) and Equipment is an Asset (A) Cash (A) – $1,000 and Equipment (A) + $1,000 Yes - see below.

2-3
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Chapter 02 - Investing and Financing...

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