Ex 1-6A Components of the accounting equation

Lang Enterprises was started when it acquired $4000 cash from creditors and $6000 from owners. The company immediately purchased land that cost $9000.

Required
a. Record the events under an accounting equation.

Assets = Liabilities + Capital

| Assets |= | Liabilities |+ | Capital |
|Cash |Land | | Creditors | | |
|10,000 | |= |4,000 …show more content…

Accounting reports are based on past performance. These past records are useful for future planning. This is clear from Budgeting because budgets are prepared for future period which is based on the accounting records of past period. For example; it is easy to make changes in future sale prices and new orders can be negotiated on the basis of these records.

Ex 1-9A Missing Information and Recording Events

As of December 31, 2013, Post Company had total cash of $156,000, notes payable of $85,600, and a common stock of $52,400. During 2014, post earned $36,000 of cash revenue, paid $20,000 for cash expenses, and paid a $3000 cash dividend to the stockholders.

a. Determine the amount of retained earnings as of December 31, 2013.

Retained earnings = $156,000 -$85,600 -$52,400

= $18,000

Therefore, the amount of retained earnings as of December 31, 2013 will be $18,000

b. Create an accounting equation and record the beginning account balances under the appropriate elements.

Assets = Liabilities + Capital

Assets |= | Liabilities |+ |Common Stock |+ |Retained earnings | | Cash | | Notes payable | | | | | |156,000 |= |85,600 |+ |52,400 |+ |18,000 | |

c. Record the revenue, expense, and dividend events under the appropriate elements of the accounting equation