Fraser Baker opened Baker’s Media Consulting in Winnipeg on September 1, 2024. On September 30, the balance sheet showed Cash $5,700; Accounts Receivable $2,100; Supplies $350; Equipment $7,600; Accounts Payable $4,300; and F. Baker, Capital $11,450. During October, the following transactions occurred:

Oct. 1 Paid $3,800 of the accounts payable.

1 Paid $900 rent for October.

4 Collected $1,550 of the accounts receivable.

5 Hired a part-time office assistant at $80 per day to start work the following week.

8 Purchased additional equipment for $4,000, paying $500 cash and signing a note payable for the balance.

14 Performed $900 of consulting work on account.

15 Paid $300 for advertising.

18 Collected $400 from customers who received services on October 14.

20 Paid $500 for family dinner celebrating Fraser’s son’s university graduation.

25 Borrowed $8,000 from the Manitoba Bank on a note payable.

26 Sent a statement reminding a customer that he still owed the company money from September.

28 Earned revenue of $5,400, of which $3,100 was paid in cash and the balance was due in November.

29 Paid the part-time office assistant $720 for working nine days in October.

29 Received $2,800 cash for consulting work to be performed in November.

30 Received the telephone bill for the month, $205. 30 Withdrew $1,200 cash for personal expenses. Instructions

a. Beginning with the September 30 balances, prepare a tabular analysis of the effects of the October transactions on the accounting equation.
b. Prepare an income statement and statement of owner’s equity for October, and a balance sheet at October 31.

Taking It Further

Fraser is confused about the accounting treatment of the October 20 transaction. Explain the reason for this treatment.