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Female Narrator: Welcome to Accounting 201.
This is a Tegrity video for Lions and Tigers,
Case Problem #1, or Transaction Analysis.
If you are wanting to have the information in front of you,
you may pause this video and print out the case
that was posted on ANGEL,
and it looks like what is shown on the screen.
Okay, so what I have done is I have taken the liberty
of setting up the transaction analysis schedule
just in a simple format, so you can read as I go along.
The one thing that you're gonna want to do is know
where your pause button are...is and some of those things,
so you can update if necessary or stop if necessary.
So...the first transaction is on October 25th,
a two-year lease was signed.
The signing of the lease is not an economic...event.
So you are not going to make any entry.
B, on November 1st, Lions and Tigers
deposited 20,000 in cash to its bank account.
This money was exchanged for common stock,
so your cash is gonna go up 20,000,
and your common stock is gonna go up 20,000.
And that is your B, so when you exchange stock...
that's what you're gonna do.
C, they pay 500 cash to Redmond Property Rentals
for November month's rent, so when we pay rent,
or we pay anything,
our cash is going to go down 500.
And then, we are going to have a decrease
in retained earnings for rent expense of 500.
On D, on November 2nd, they pay office twice 1,800
for secondhand grooming equipment.
So when they buy the grooming equipment,
they're going to have an increase in equipment of 18,
and they're going to have a decrease of what?
Well, cash, because it said they pay.
When you see the word "pay,"
we know it's going to involve cash.
On November 2nd, they bought office equipment,
cash registers, etc. by signing a note for 3,500.
Once gain, their equipment goes up,
but this time, they're gonna have an increase
in a notes payable or a liability.
On F, on November 4th, they buy 1,000 in grooming supplies
from The Dog and Pony-- 500 in cash and 500 on account.
So we're going to have...
supplies go up 1,000.
We're gonna have accounts payable go up 500,
because we now owe 500.
But we're going to have cash go down 500.
So this is what we call a "compound transaction,"
because it affects multiple accounts.
On G, the first employee was hired.
This is not an economic event.
Just because I hire someone doesn't trigger a transaction.
There's no transaction until we pay them.
On November 15th, we pay...
they paid janitorial 350 for the first cleaning.
So you have a 350 negative in cash,
and you have a 350 negative in retained earnings.
Cleaning expense.
On November 19th, Carmen is paid,
so now you get to pay that employee 125.
So minus 125, and then, minus 125 for employee.
It would be salaries or wages expense.
The chart of account is posted under course content.
And then, on J, we pay $1,000 in cash to Redmond Property
for December and January's rent.
So we're going to pay 1,000.
So cash is going to go down 1,000,
but our prepaid rent is going to go up 1,000.
Prepaid rent is where we're paying something ahead of time.
So we have an asset, because we have the right
to receive that rent or that space for two months.
Um...and when we get further down the road,
we'll teach you how to adjust that out.
So just prepaid rent is an asset.
And then, on K, Lions and Tigers
hold their grand opening on November 29th.
The first day of business
results in 800 in cash collections.
So cash goes up 800,
and retained earnings finally goes up.
And we're gonna go up 800 here, and this is for revenue.
And then, on L, on November 30th,
several animals were groomed for 232 on account.
When you see that word "on account,"
it can mean accounts receivable, or it can mean accounts payable.
Okay?
Accounts receivable is we have the right to receive,
and accounts payable is we have the right
or the obligation to pay.
So accounts receivable will be customers.
Accounts payable will be suppliers or vendors.
So this is another $232 increase
in retained earnings for revenue.
We have now completed all the transaction.
The next step in transaction analysis
is to go through and add these up.
So if I take our 20,000 that I started with way up here,
minus 500, minus 18, minus 5, minus 350, minus 125,
minus 1,000, plus 800, I'm going to get 16,525.
Accounts receivable totals 232.
Grooming supplies is 1,000.
Prepaid rent is 1,000.
Equipment is 5,300, because remember,
I had two transactions here.
And accounts payable, uh....is 500.
Notes payable is 3,500.
Common stock is 20,000, and retained earnings is 57.
So we want to make sure that this all balances.
This is a critical step in the process.
So we add all of those together.
And these here total 24,057, and these here settle 24,057.
And you now have transaction analysis.
Thank you.
Please ask any questions you have via the discussion board.