Accounting and the
Business Environment
Chapter 1
Exercises
Business Transactions

In-Class Exercise (Form groups and work exercise):
Exercise No. Page
E1-29
45
Affect of Transactions on the
Accounting Equation
(Set up equation format, as reflected on the next chart,
to complete the exercise)
Business Transactions
Exercise
Page
E1-29
45
Affect of Transactions on
the Accounting Equation
(Also prepare an Income Statement, Statement of Owner’s Equity,
and Balance Sheet)
Business Transactions
Caren Smith opened a medical practice. During July, the first month of operation,
the business, titled Caren Smith, M.D., experienced the following events:
July 6. Smith contributed $55,000 in the business by opening a bank account in
the name of C. Smith, M.D. The corporation issued common stock to
Smith.
9. Paid $46,000 cash for land.
12. Purchased medical supplies for $1,800 on account.
15. Officially opened for business.
20. Paid cash expenses: employees salaries, $1,600; office rent, $900;
utilities, $100.
31. Earned service revenue for the month, $8,000, receiving cash.
31 Paid $1,100 on account.
Record transactions on the equation form.
Business Transactions
$61,100
$61,100
Business Transactions
Income Statement
Business Transactions
$ 8,000
Business Transactions
Statement of Retained Earnings
Business Transactions
Business Transactions
Balance Sheet
Business Transactions
Business Transactions
End of Exercise