Consider the following transactions for Thomas Company and their effect on the accounting equation. Click on each transaction for transaction details. Determine the new balance for each component of the accounting equation resulting from the transaction. (You will not need to enter the amount of each transaction, only the balance afterthe transaction.) If an amount box does not require an entry, leave it blank.

Transaction

Assets =

Liabilities +

Stockholders' Equity

Beginning$0$0$01.Investmentinthebusiness2. Borrow cash3. Purchase equipment4.Revenuesearned5.Expensesincurred6. Dividends

The foundation for the accounting system and the financial statementsis the accounting equation. Select the terms that complete the accounting equation.

Accounting Equation

Assets = Liabilities + Stockholders' Equity

For each of the following items, indicate the element of the accounting equation to which it belongs: Assets, Liabilitiesor Stockholders' Equity.

Assets

Liabilities

Stockholders' Equity

Accounts Payable

Accounts Receivable

Auto Expense

Common Stock

Cash

Dividends

Fees Earned

Land

Miscellaneous Expense

Supplies

Supplies Expense

Wages Expense

Consider the following transactions for Thomas Company and their effect on the accounting equation. Click on each transaction for transaction details. Determine the new balance for each component of the accounting equation resulting from the transaction. (You will not need to enter the amount of each transaction, only the balance afterthe transaction.) If an amount box does not require an entry, leave it blank.

Transaction

Assets =

Liabilities +

Stockholders' Equity

Beginning$0$0$01.Investmentinthebusiness2. Borrow cash3. Purchase equipment4.Revenuesearned5.Expensesincurred6. Dividends

1. Match each of the following scenarios with the accounting principleor accounting assumptionthat it best illustrates.

ScenarioAccounting Principle or AssumptionAlthough GGE Enterprises Inc. received a good deal on a used truck, the amount recorded in the accounting records is the amount the company paid, not the amount the truck was actually worth. Measurement principle The home of Rob Elliot, the owner of GGE Enterprises Inc., is not listed among the company's assets.Business entity assumption ThomasCompanyrecordssalesforthemonthalongwith the expenses incurred to produce the sales.Time period assumption Despite several years of falling sales, Thomas Company continues to forecast sales and make strategic plans to raise revenues and cut expenses.Going concern assumption The accounting records of Thomas Company are in dollars, not euros, although the Ohio-based company is owned by a German firm.Monetary unit assumption Several years after Thomas Company purchased new office equipment, the company's accounting records still show the original purchase price.Historical cost principle Thomas Company provides earnings information to investors at the end of every quarter.Time period assumption GGE Enterprises records a deposit received from a customer for work to be performed later in the month. The customer is billed for the remaining amount after the work is complete, and the customer's payment is recorded.Revenue recognition principle

2. Thomas Company has decided to purchase a company vehicle. The accountant was given all of the purchase details. Which should be used to record the vehicle in the accounting records?

The average selling price of similar vehicles in the area.

The amount of the loan with the bank.

The price negotiated with the dealer.

The manufacturer's suggested retail price (MSRP).

A business will construct its financial statements in a particular order because they are interrelated. This means that items formulated in an earlier statement feed into the subsequent statements, and changes to items on one financial statement can have compounding effects on the overall financial position of a company.

Which of the following is one reason the retained earnings statement is prepared after the income statement?

Which of the following is one reason the retained earnings statement is prepared before the balance sheet?

On November 1 of the current year, Rob Elliot invested $29,250.00 of his cash to form a corporation, GGE Enterprises Inc., in exchange for shares of common stock. No other common stock was issued during November or December. After a very successful first month of operations, the retained earnings as of November 30 were reported at $5,000.00. After all transactions have been entered into the accounting equation for the month of December, the ending balances for selected items on December 31 follow. On that date, the financial statements were prepared. The balance sheet reported total assets of $54,900.00 and total stockholders' equity of $37,970.00.

Accounts

Common

Retained

Fees

Utilities

Wages

Rent

Supplies

Miscellaneous

Cash

Supplies

Land

Payable

Stock

Earnings

Dividends

Earned

Expense

Expense

Expense

Expense

Expense

?$8,350.00$15,500.00??$5,000.00$5,750.00$27,500.00$6,500.00?$4,650.00$1,295.00$385.00

Review the following questions. Place an 'X' in the box to indicate which financial statement(s) report the desired information. Enter the amount reported on the financial statement.

Balance

Income

Retained Earnings

Sheet

Statement

Statement

Amount

1. What is the amount reported for total liabilities and stockholders' equity on December 31?2. What is the retained earnings amount reported on December 31?3. How much does GGE Enterprises Inc. owe to its creditors?4. How much cash is being held by GGE Enterprises Inc.?5. By what amount did retained earnings increase or decrease during the period?6. What is the amount of profit or loss during December?7. What were the total expenses for December?8. How much was paid for wages?