Ming Chen began a professional practice on June 1 and plans to prepare financial statements at the end of each month. During June, Ming Chen (the owner) completed these transaction... Ming Chen began a professional practice on June 1 and plans to prepare financial statements at the end of each month. During June, Ming Chen (the owner) completed these transactions: a) Owner invested $60,000 cash in the company along with equipment that had a $15,000 market value. b) the company paid $1,500 cash for rent of office space for the month. c) The company purchased $10,000 of additional equipment on credit (payment due within 30 days). d) the company completed work for a client and immediately collected the $2,500 cash earned. e) The company completed work for a client and sent a bill for $8,000 to be received within 30 days. f) The company purchased additional equipment for $6,000 cash. g) The company paid an assistant $3,000 cash as wages for the month. h) The company collected $5,000 cash as a partial payment for the amount owed by the client in transaction (e). i) The company paid $10,000 cash to settle the liability created in transaction (c). j) Owner withdrew $1,000 cash from the company for personal use. Read more

Steps to Solve

1. Record Owner's Investment Ming Chen invested $60,000 cash into the company and equipment valued at $15,000.
   This increases cash and equipment assets.

   • Cash: +$60,000
   • Equipment: +$15,000

2. Record Rent Payment The company paid $1,500 cash for rent.
   This decreases cash assets and increases rent expense.

   • Cash: -$1,500
   • Rent Expense: +$1,500

3. Record Equipment Purchase on Credit The company purchased $10,000 of additional equipment on credit.
   This increases equipment and creates a liability (accounts payable).

   • Equipment: +$10,000
   • Accounts Payable: +$10,000

4. Record Work Completed and Cash Collection The company completed work and collected $2,500 in cash.
   This increases cash and increases revenue.

   • Cash: +$2,500
   • Revenue: +$2,500

5. Record Work Completed and Invoice Issued The company sent a bill for $8,000 to a client for work done.
   This increases accounts receivable and revenue.

   • Accounts Receivable: +$8,000
   • Revenue: +$8,000

6. Record Additional Equipment Purchase The company purchased additional equipment for $6,000 cash.
   This decreases cash assets and increases equipment assets.

   • Cash: -$6,000
   • Equipment: +$6,000

7. Record Wage Payment The company paid $3,000 cash as wages for the month.
   This decreases cash assets and increases wage expenses.

   • Cash: -$3,000
   • Wage Expense: +$3,000

8. Record Collection of Partial Payment The company collected $5,000 cash as a partial payment from the client.
   This increases cash and decreases accounts receivable.

   • Cash: +$5,000
   • Accounts Receivable: -$5,000

9. Record Payment to Settle Liability The company paid $10,000 cash to settle the liability from the equipment purchase.
   This decreases cash and decreases accounts payable.

   • Cash: -$10,000
   • Accounts Payable: -$10,000

10. Record Owner's Withdrawal The owner withdrew $1,000 cash for personal use.
    This decreases cash and increases owner's drawing.

• Cash: -$1,000
• Owner's Drawing: +$1,000