Answer to Problem

1

Problem 1-4. An Analysis of the transactions made by Acme Consulting for the month of July

1. Explain each transaction.

1) $20,000 is the amount invested by the owner/s into the business 2) $7,000 is the cost of the equipment purchased for the business. $5,000 has been paid. $2,000 is the amount still owed for the purchase. 3) $1,000 is the amount expended to purchase inventories and supplies for the business. 4) $4,500 is the amount paid for salaries of the business’ employees. 5) $10,000 is the revenue of the business. $5,000 has been paid in cash, while $5,000 is still yet to be received. 6) $1,500 is the amount further paid for the purchase of the equipment referred to in (2). 7) $1,000 of the $5,000 in number (5), account receivable, has been paid. 8) $750 is the amount paid for rent 9) $500 is the amount paid for utilities 10) $200 is the amount expended for travel which has been through credit. 11) $200 is the worth of supplies that has been used by the business.

2. List the changes in the company’s balance sheet during the month of July

|Acme Consulting |
|Balance Sheet |
|July |
| | | | | |
|Assets | |Liabilities |
| | | | | |
|Cash |12,750 | |Accounts Payable |700 |
|Equipment |7000