You Are Provided with the Statement of Financial Position at the Beginning

question 14

Essay

You are provided with the statement of financial position at the beginning of the period for a firm of accountants. You are also given four of the transactions that have occurred during the period.
REQUIRED:
a)Complete the table to show how each transaction affects the accounts shown.
b)Calculate the figures in the final column of the table from which the statement of financial position at the end of the period can be prepared.
$\begin{array}{|r|r|r|r|r|r|r|}\hline &\text { Beginning } & \text { Transaction } & \text { Transaction } & \text { Transaction } & \text { Transaction } & \text { Ending } \\&\text { Balance } & 1 & 2 & 3 & 4 & \text { Balance }\\&\text { Sheet }&&&&&\text { Sheet }\\\hline \text { Assets } & \$ & \$ & \$ & \$& \$& \$ \\\hline \text { Cash } & 10000 & & & \\\hline \text { accounts } & \\\text { receivable } & 5500 \\\hline \text { Plant \& } & \\\text { Equip } & \underline{50000} \\\hline&65,000\\\hline \text { Liabilities } & \\\hline \text { accounts } & \\\text { payable } & 6000 \\\hline \text { Equity } & \underline{59500} \\\hline & \underline{65500}\\\hline\end{array}$ Transactions for the period:
1. Collected $3 000 from debtors
2. Paid accounts payable $6 000
3. Owner paid in additional capital contribution of $10 000
4. Purchased on credit $2 000 of additional plant.

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Definitions:

Debt-Equity Ratio

A financial indicator showing the relationship between borrowed funds and equity in a company's asset financing.

Taxable Income

The portion of an individual's or company's income used to determine how much tax will be owed to the government.

Interest Tax Shield

The reduction in income taxes that results from taking an allowable deduction for interest expenses.

Interest Tax Shield

The decrease in income taxes that occurs by subtracting a permitted deduction, like debt interest, from taxable income.