Question

1-M Mastery Problem: Determining how transactions change an accounting equation L04, 5, 6 Peter Gentry operates a service business called Doggywood Pet Suites. Doggywood Pet Suites uses the accounts shown in the following accounting equation. Use the form in your Working Papers to complete this problem. + Owner's Equity Trans Liabilities Acets. Pay- Paws & Claws Co. Acets. Rec.- Prepaid + Dr. Shephard + Supplies + Insurance = 100 Peter Gentry. Capital Cash + Beg Bal 2.500 200 1,300 -500 expense New Bal 2,000 200 100 1.300 1,000 Instructions: For each transaction, complete the following. Transaction 1 is given as an example. a. Analyze the transaction to determine which accounts in the accounting equation are affected. b. Write the amount in the appropriate columns, using a plus sign (+) if the account increases or a minus sign (-)! the account decreases. c For transactions that change owner's equity, write in parentheses a description of the transaction to the right of the amount d. Calculate the new balance for each account in the accounting equation. e. Before going on to the next transaction, determine that the accounting equation is still in balance. Transactions: 1. Paid cash for rent, $500.00. 2. Received cash from owner as an investment, $700.00. 3. Paid cash for telephone bill, $75.00. 4. Received cash from sales, $1,050.00. 5. Bought supplies on account from Paws & Claws Co., $275.00. 6. Sold services on account to Dr.Shephard, $285.00. 7. Paid cash for advertising, $450.00. 8. Paid cash for supplies, $185.00. Starting a Proprietorship: Changes That Affect the Accounting Equation

Answer 1

Transaction	Assets				Liabilities	Owner's Equity
	Cash	Accounts Receivable	Supplies	Prepaid Insurance =	Accounts Payable +	Peter Gantry, Capital
Beg. bal.	2,500		200	100	1,300	1,500
1.	-500					-500
New bal.	2,000		200	100	1,300	1,000
2	700					700
New bal.	2,700		200	100	1,300	1,700
3	-75					-75
New bal.	2,625		200	100	1,300	1,625
4.	1,050					1,050
New bal.	3,675		200	100	1,300	2,675
5.			275		275
New bal.	3,675		475	100	1,575	2,675
6.		285				285
New bal.	3,675	285	475	100	1,575	2,960
7.	- 450					- 450
New bal.	3,225	285	475	100	1,575	2,510
8.	-185		185
New bal.	3,040	285	660	100	1,575	2,510
9.	150	-150
New bal.	3,190	135	660	100	1,575	2,510
10	- 200				- 200
New bal.	2,990	135	660	100	1,375	2,510
11.	-100					-100
New bal.	2,890	135	660	100	1,375	2,410
12	475					475
New bal.	3,365	135	660	100	1,375	2,885
13	- 800					- 800
New bal	2,565	135	660	100	1,375	2,085