Final answer:
Certainly! Here are the main answers summarizing the transactions:
a. August 1: - Schmidt invested $3,000 cash and $15,000 worth of equipment into The Cutlery.
b. August 1: - She paid $600 cash for six months of insurance, increasing prepaid insurance.
c. August 2: - She paid $600 cash for furniture for the shop, increasing the furniture asset.
d. August 3: - She paid $900 cash for renting space in a strip mall for August, which is recorded as a rent expense..
Step-by-step explanation:
Let me break down the accounting effects for each transaction:
a. August 1:
- Schmidt put $3,000 cash into a chequing account.
- She also invested $15,000 of equipment into the business.
The accounting equation for this would be:
Assets (Cash) + Assets (Equipment) = Owner's Equity (Capital)
$3,000 + $15,000 (initial investment)
b. August 1:
- Schmidt paid $600 cash for six months of insurance effective immediately.
This would decrease cash and increase prepaid insurance. The accounting entry would be:
Assets (Cash) - Assets (Prepaid Insurance) = Owner's Equity (No change)
$600 (payment for insurance)
c. August 2:
- Schmidt paid $600 cash for furniture for the shop.
This would decrease cash and increase furniture. The accounting entry would be:
Assets (Cash) - Assets (Furniture) = Owner's Equity (No change)
$600 (purchase of furniture)
d. August 3:
- Schmidt paid $900 cash to rent space in a strip mall for August.
This would decrease cash and be an expense. The accounting entry would be:
```
Assets (Cash) - Expenses (Rent) = Owner's Equity (No change)
$900 (payment for rent)
Please note that these are simplified accounting entries, and in a real accounting system, you would have specific accounts for each of these categories (e.g., Cash, Equipment, Prepaid Insurance, Furniture, Rent Expense).
It's also important to consider any taxes or other regulatory requirements depending on the jurisdiction.