Final answer:
Transactions for Holmes Cleaning Service can be organized under the accounting equation with increases and decreases in assets, liabilities, and owner's equity based on services provided, collections made, salary payments, and adjustments for uncollectible accounts. From the self-check question, after subtracting total expenses from sales revenue, the firm's accounting profit is $50,000.
Step-by-step explanation:
To organize the transaction data for Holmes Cleaning Service under the accounting equation, we need to understand that the accounting equation is Assets = Liabilities + Owner's Equity. Here is how the events affect the accounts:
- Providing cleaning services on account increases Accounts Receivable (Asset) by $170,000 and Service Revenue (Owner's Equity) by $170,000.
- Collecting cash from accounts receivable increases Cash (Asset) by $127,500 and decreases Accounts Receivable (Asset) by $127,500.
- Paying salaries decreases Cash (Asset) by $28,000 and decreases Salaries Expense (Owner's Equity) by $28,000.
- Adjusting for uncollectible accounts increases Uncollectible Accounts Expense (Owner's Equity) by $1,900 and increases Allowance for Doubtful Accounts (Liability) by $1,900.
Now, let's calculate the firm's accounting profit from the self-check question. With sales revenue of $1 million, and total expenses on labor, capital, and materials of $950,000 ($600,000 + $150,000 + $200,000), the firm's accounting profit would be $50,000 ($1 million - $950,000).