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Effect of accruals on the financial statements

Milea Inc. experienced the following events in 2016, its first year of operations:

1. Received $20,000 cash from the issue of common stock.
2. Performed services on account for $56,000.
3. Paid the utility expense of $2,500.
4. Collected $48,000 of the accounts receivable.
5. Recorded $10,000 of accrued salaries at the end of the year.
6. Paid a $2,000 cash dividend to the stockholders.

Required:
Record the events in general ledger accounts under an accounting equation.

Respuesta :

Answer:

Assets = Liabilities + Stockholders’ Equity = $71,500

Explanation:

Note: See the attached excel file for how the events are recorded in general ledger accounts under an accounting equation.

From the attached excel file, we can obtain the following:

Assets = Total assets = $63,500 + $8,000 = $71,500

Liabilities = Total liabilities = $10,000

Stockholders’ Equity = Total Stockholders’ Equity = $20,000 + $41,500 = $61,500

Liabilities + Stockholders’ Equity = $10,000 + $61,500 = $71,500

Therefore, the accounting equation holds as follows:

Assets = Liabilities + Stockholders’ Equity = $71,500

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