Question

For each transaction, (a) analyze the transaction using the accounting equation, (b) record the transaction in journal entry form, and (c) post the entry using T-accounts to represent ledger accounts. Use the following (partial) chart of accounts—account numbers in parenthesis: Cash (101); Accounts Receivable (106); Trucks (153); Equipment (167); Accounts Payable (201); Common Stock (307); Retained Earnings (318); Services Revenue (403); Wages Expense (601), and Landscaping Expense (696).

1.
On May 15, DeShawn Tyler opens a landscaping company called Elegant Lawns by investing $70,000 in cash along with equipment having a $30,000 value in exchange for common stock.

2. On May 21, Elegant Lawns purchases office supplies on credit for $280.
3. On May 25, Elegant Lawns receives $7,800 cash for performing landscaping services.
4.
On May 30, Elegant Lawns receives $1,000 cash in advance of providing landscaping services to a customer.

Answer 1

Transactions for a landscaping company were analyzed using the accounting equation, recorded in journal entries, and posted to T-accounts, ensuring that the accounting equation remained balanced.

Step-by-step explanation:

Understanding the Transactions

Accounting transactions can be analyzed using the basic accounting equation, recorded as journal entries, and then posted to T-accounts which represent accounts in the ledger.

Transaction 1 Analysis and Recording

The owner invested $70,000 in cash and $30,000 in equipment in the business:

• 
  
• Accounting Equation: Assets (Cash + Equipment) increase by $100,000; Equity (Common Stock) increases by $100,000 to balance it out.
• 
  
• Journal Entry: Debit Cash $70,000, Debit Equipment $30,000, Credit Common Stock $100,000.
• 
  
• T-Account Posting: Cash and Equipment accounts are debited, and Common Stock account is credited.

Transaction 2 Analysis and Recording

Purchased office supplies on credit for $280:

• 
  
• Accounting Equation: Assets (Supplies) increase by $280; Liabilities (Accounts Payable) increase by $280.
• 
  
• Journal Entry: Debit Office Supplies $280, Credit Accounts Payable $280.
• 
  
• T-Account Posting: Office Supplies account is debited, and Accounts Payable account is credited.

Transaction 3 Analysis and Recording

Received $7,800 cash for services rendered:

• 
  
• Accounting Equation: Assets (Cash) increase by $7,800; Equity (Services Revenue) increases by $7,800.
• 
  
• Journal Entry: Debit Cash $7,800, Credit Services Revenue $7,800.
• 
  
• T-Account Posting: Cash account is debited, and Services Revenue account is credited.

Transaction 4 Analysis and Recording

Received $1,000 cash in advance for services to be provided:

• 
  
• Accounting Equation: Assets (Cash) increase by $1,000; Liabilities (Unearned Revenue) increase by $1,000.
• 
  
• Journal Entry: Debit Cash $1,000, Credit Unearned Revenue $1,000.
• 
  
• T-Account Posting: Cash account is debited, and Unearned Revenue account is credited.

By analyzing each transaction, we ensure that the basic accounting equation (Assets = Liabilities + Equity) remains in balance after each transaction is recorded and posted.

Answer 2

Answer Explanation:

Accounting equation:

Asset = Liabilities + Equity

1) 70,000 + 30,000 = 0 + 100,000

2) 70,000 + 30,000 = 280 + 100,000 - 280

3) 77,800 + 30,000 = 280 + 100,000 + 7,800 - 280

4) 78.800 + 30,000 = 1,280 + 100,000 + 7,800 - 280

Journal entries:

cash 70,000 debit

equipment 30,000 debit

Common Stock 100,000 credit

Landscaping Expense 280 debit

account payable 280 credit

cash 7,800 debit

service revenue 7,800 credit

cash 1,000 debit

unearned revenue 1,000 credit

T-Accounts

Cash Equipment Landscaping Expense

Debit Credit Debit Credit Debit Credit

70,000 30,000 280

7,800

1,000

78,800

Account Payable Unearned Revenue Common Stock

Debit Credit Debit Credit Debit Credit

280 1,000 100,000

Service revenue

Debit Credit

7,000

Note: I uused landscaping expense as there was no supplies account to pick from your choise.