Ask Question
2 June, 09:19

The following transactions were completed by the company

(a) The company completed consulting work for a client and immediately collected $6,700 cash earned

(b) The company completed commission work for a client and sent a bill for $5,200 to be received within 30 days

(c) The company paid an assistant $2,000 cash as wages for the period

(d) The company collected $2,600 cash as a partial payment for the amount owed by the client in transaction b

(e) The company paid $940 cash for this period's cleaning services

Enter the impact of each transaction on individual items of the accounting equation.

+2
Answers (2)
  1. 2 June, 09:37
    0
    (a) The company completed consulting work for a client and immediately collected $6,700 cash earned - Assets (increase) = Liabilities (NA) + Equity (increase)

    (b) The company completed commission work for a client and sent a bill for $5,200 to be received within 30 days - Assets (increase) = Liabilities (NA) + Equity (increase)

    (c) The company paid an assistant $2,000 cash as wages for the period - Assets (decrease) = Liabilities (NA) + Equity (decrease)

    (d) The company collected $2,600 cash as a partial payment for the amount owed by the client in transaction b - Assets (No effect) = Liabilities (NA) + Equity (NA)

    (e) The company paid $940 cash for this period's cleaning services - Assets (decrease) = Liabilities + Equity (decrease)

    *NA = Not Applicable

    Explanation:

    Accounting equation is defined by this formula: Assets = Liabilities + Equity

    Cash of $6,700 collected by the company increase Cash (Asset) and increases Service revenue (Retained earnings/Equity). The commission work increases Accounts receivable (Asset) and Credit sales (Retained earnings/Equity) by $5,200. Payment of $2,000 for wages decreases Cash (Asset) and increases Wages expense (which decreases Equity). Collection of $2,600 has no effect on the asset, since the company would have debited Accounts receivable to credit Sales revenue initially, so the collection is a debit to Cash (Asset) and credit to Accounts receivable (Asset). Payment for cleaning services of $940 decrease Cash (Asset) and increase Operating expenses (ultimately decreases Equity).
  2. 2 June, 09:40
    0
    The Accounting Equation is As follows:

    Assets = Liabilities + Stockholder's Equity

    Statement (a)

    With the cash collected there will be increase in assets by $6,700

    And with the recognition of revenue there will be increase in stockholder's equity as retained earnings will increase by the amount $6,700,

    Assets increase $6,700 = Liabilities + Stockholder's equity increase $6,700.

    Statement (b)

    Revenue is recognized and with that retained earnings will increase, and accordingly stockholder's equity will also increase by $5,200,

    As the cash is not realized now, accounts receivables increase and accordingly, assets increase by $5,200.

    Statement (c)

    Cash paid as wages will reduce cash and accordingly assets by $2,000,

    Also, with the recognition of expense, retained earnings will reduce and accordingly stockholder's equity will reduce by $2,000.

    Statement (d)

    This will increase the cash and decrease the accounts receivable by $2,600.

    Thus on the assets side there will be + $2,600 and - $2,600 making it neutral.

    No effect on the right side, as net effect on left side of equation = 0

    Statement (e)

    Cash paid for cleaning expense will decrease assets by $940,

    And also this will decrease retained earnings and accordingly stockholder's equity will decrease by $940.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “The following transactions were completed by the company (a) The company completed consulting work for a client and immediately collected ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers