ACCT 500 Coursework Example

ACCT500 Week 1 Problem Set
Name
Institution Affiliation
Transactions incurred in April:
Paid wages of $700 for the 1st pay period in the month
Paid creditors on account $4,000
Purchased a new machine on account for $3,100
Received $7,200 cash from customers for bike repairs service
Paid courier service expense $280
Paid $850 cash for wages for the 2nd pay period in the month.
Ruddy Lewis withdrew $500 cash for personal use (“drawings”)
Paid creditors on account $1,200
Inventory of supplies at the end of the month (April 30) was $550
Received $3,500 cash from customers for bike repairs service
To record the above transaction, the accounting equation is applied. The equation is represented as Assets = Liabilities + Shareholder Equity. From the equation, it is evident that all the business assets are acquired using borrowed finances or by using the shareholder’s money. When recording the transaction, any sale or purchase by the business affects both sides of the equation.
Assets = Liabilities + Owners Equity
Transaction Numbers/ Balance Cash Supplies Machines Accounts Payable Ruddy Lewis Account
Balance (April 1) $ 10,800 $ 1,200 $ 6,400 $ 6,000 $ 12,400
1 -$ 700 0 0 0 -$ 700
Balance $ 10,100 $ 1,200 $ 6,400 $ 6,000 $ 11,700
2 -$ 4,000 0 0 -$ 4000 0
Balance $ 6,100 $ 1,200 $ 6,400 $ 2000 $ 11,700
3 0 0 $ 3,100 $ 3100 0
Balance $ 6,100 $ 1,200 $ 9,500 $ 5,100 $ 11,700
4 $ 7,200 0 0 0 $ 7,200
Balance $ 13,300 $ 1,200 $ 9,500 $ 5,100 $ 18,900
5 -$ 280 0 0 0 -$ 280
Balance $ 13,020 $ 1,200 $ 9,500 $ 5,100 $ 18,620
6 -$ 850 0 0 0 -$ 850
Balance $ 12,170 $ 1,200 $ 9,500 $ 5,100 $ 17,770
7 -$ 500 0 0 0 -$ 500
Balance $ 11,670 $ 1,200 $ 9,500 $ 5,100 $ 17,270
8 -1,200 0 0 -1,200 0
Balance $ 10,470 $ 1,200 $ 9,500 $ 3,900 $ 17,270
9 0 -$ 650 0 0 -$ 650
Balance $ 10470 $ 550 $ 9,500 $ 3,900 $ 16,620
10 $ 3500 0 0 0 $ 3,500
Balance, April 30 $ 13,970 $ 550 $ 9,500 $ 3,900 $ 20,120

Short question 1
The equity of a company represents the current stake held on the books by the investors or shareholders of a company. A firm uses the equity to capital to purchase assets. The equity is sourced from the initial investments in the company and the retained earnings it builds in the course of business. According to Herve (2006), a company’s equity is determined by subtracting all the liabilities from the shareholders’ total assets. In the case of Kevin Foster’s, the business starts with $20,000 in cash, $60,000 invested in equipment, and supplies worth $5,000. Thus the equity of the company can be determined as:
Equity = Cash + Value of Equipment + Value of Supplies
Equity = $20,000 + $60,000 + $5,000 = $85,000
Question 2
The owner’s equity is equivalent to the difference between the assets and the liabilities of a company. Thus, equity if Kevin Foster includes $30,000 in notes payable, then the owner’s equity will be given as:
Owner’s equity = Assets – Liabilities
Owner’s equity = $85,000 – $30,000 = $55,000.

References
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Stolowy, H., & Michel Lebas. (2006). Financial accounting and reporting: A global perspective. London: South-Western Cengage Learning.
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