Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE 1-2

Purpose:

(L.O. 7) This exercise illustrates that: (1) Each transaction has a dual effect on the basic accounting equation. (2) The basic accounting equation remains in balance after each transaction is properly analyzed and recorded.

Marc Anthony owns and operates the J. Lo Motorcycle Repair Shop, Inc. A list of the transactions that take place in August 2014 follows:

1. August 1	Marc begins the business by investing $5,000 cash in the business in exchange for $5,000 of common stock.
2. August 2	J. Lo Motorcycle Repair Shop, Inc. rents space for the shop behind a strip mall and pays August rent of $800.
3. August 3	J. Lo Motorcycle Repair Shop, Inc. purchases supplies for cash, $3,000.
4. August 4	J. Lo Motorcycle Repair Shop, Inc. pays Cupboard News, a local newspaper, $300 for an ad appearing in the Sunday edition.
5. August 5	J. Lo Motorcycle Repair Shop, Inc. repairs a cycle for a customer. The customer pays cash of $1,300 for services rendered.
6. August 11	J. Lo Motorcycle Repair Shop, Inc. repairs a cycle for a customer, Ben Affleck, on credit, $500.
7. August 13	J. Lo Motorcycle Repair Shop, Inc. purchases supplies for $900 by paying cash of $200 and charging the rest on account.
8. August 14	J. Lo Motorcycle Repair Shop, Inc. repairs a Harley for Zonie Kinkennon, a champion rider, for $1,900. J. Lo Motorcycle Repair Shop, Inc. collects $1,000 in cash and puts the rest on account.
9. August 24	J. Lo Motorcycle Repair Shop, Inc. collects ...