In 2006 you joined a group of 20 Richland College graduates to start a company that provides
innovative tutoring and educational services You are responsible for all accounting activities.
After applying to the Secretary of State in Austin, Shannon’s Tutoring Corporation
(STC)received its corporate charter and began business as a Texas Corporation on December 1,
2006. During the first month of business the following Transactions occurred. You must analyze
each transaction’s effect on the Accounting Equation and Prepare the Income Statement,
Statement of Retained Earnings and the Balance Sheet for the Year ended 12/31/2006.
12/01/06
STC began business by investing $50,000 in exchange for 10,000 shares of Common Stock.
12/1/06
STC Paid $12,000 for 1 year of rent for the 12 month period beginning December 1, 2006
through November 30, 2007. (Hint: Prepaying rent in advance creates an Asset called Prepaid
Rent )
12/1/06
STC received $18,000 cash in advance from the Texas School System and signed a contract to
provide monthly tutoring services to students from December 2006 through May of 2007.
12/02/06
STC purchased a Computer System for $35,000 cash.
12/09/06
STC earned & received $1,000 in cash by providing tutoring services.
12/12/06
STC Billed the RISD $2,500 for tutoring services performed at their school. Payment has not
been received.
12/12/06
STC Purchased $500 of Supplies on Account.
12/21/06
STC Paid $400 Wages to employees.
12/23/06
STC Received $1,500 Cash from RISD for services billed on 12/12/06(#6).
12/29/06
STC Paid a $300 Utility Bill.
12/01/06
STC began business by investing $50,000 in exchange for 10,000 shares of Common Stock.
12/1/06
STC Paid $12,000 for 1 year of rent for the 12 month period beginning December 1, 2006
through November 30, 2007. (Hint: Prepaying rent in advance creates an Asset called Prepaid
Rent )
12/1/06
STC received $18,000 cash in advance from the Texas School System and signed a contract to
provide monthly tutoring services to students from December 2006 through May of 2007.
12/02/06
STC purchased a Computer System for $35,000 cash.
12/09/06
STC earned & received $1,000 in cash by providing tutoring services.
12/12/06
STC Billed the RISD $2,500 for tutoring services performed at their school. Payment has not
been received.
12/12/06
STC Purchased $500 of Supplies on Account.
12/21/06
STC Paid $400 Wages to employees.
12/23/06
STC Received $1,500 Cash from RISD for services billed on 12/12/06(#6).
12/29/06
STC Paid a $300 Utility Bill.
Solution
Answer
Accounting Equation: Total Assets = Capital/Equity + Liabilities
Note: After every transaction, A column = B column
Date
Tran saction no
Total Assets
=
Equity
+
Liabilities
TOTAL (B)
Cash
Fixed Assets
Supplies
Accounts Receivables
Prepaid Rent
TOTAL(A)
=
Common Stock
+
Advance from Customer
12-01-2006
1
50000
50000
=
50000
+
50000
TOTAL
50000
50000
=
50000
+
50000
12-01-2006
2
-12000
11000
-1000
=
-1000
+
-1000
TOTAL
38000
11000
49000
=
49000
+
49000
12-01-20.
In 2006 you joined a group of 20 Richland College graduates to start.pdf
1. In 2006 you joined a group of 20 Richland College graduates to start a company that provides
innovative tutoring and educational services You are responsible for all accounting activities.
After applying to the Secretary of State in Austin, Shannon’s Tutoring Corporation
(STC)received its corporate charter and began business as a Texas Corporation on December 1,
2006. During the first month of business the following Transactions occurred. You must analyze
each transaction’s effect on the Accounting Equation and Prepare the Income Statement,
Statement of Retained Earnings and the Balance Sheet for the Year ended 12/31/2006.
12/01/06
STC began business by investing $50,000 in exchange for 10,000 shares of Common Stock.
12/1/06
STC Paid $12,000 for 1 year of rent for the 12 month period beginning December 1, 2006
through November 30, 2007. (Hint: Prepaying rent in advance creates an Asset called Prepaid
Rent )
12/1/06
STC received $18,000 cash in advance from the Texas School System and signed a contract to
provide monthly tutoring services to students from December 2006 through May of 2007.
12/02/06
STC purchased a Computer System for $35,000 cash.
12/09/06
STC earned & received $1,000 in cash by providing tutoring services.
12/12/06
STC Billed the RISD $2,500 for tutoring services performed at their school. Payment has not
been received.
12/12/06
STC Purchased $500 of Supplies on Account.
12/21/06
STC Paid $400 Wages to employees.
12/23/06
STC Received $1,500 Cash from RISD for services billed on 12/12/06(#6).
12/29/06
STC Paid a $300 Utility Bill.
12/01/06
STC began business by investing $50,000 in exchange for 10,000 shares of Common Stock.
12/1/06
STC Paid $12,000 for 1 year of rent for the 12 month period beginning December 1, 2006
2. through November 30, 2007. (Hint: Prepaying rent in advance creates an Asset called Prepaid
Rent )
12/1/06
STC received $18,000 cash in advance from the Texas School System and signed a contract to
provide monthly tutoring services to students from December 2006 through May of 2007.
12/02/06
STC purchased a Computer System for $35,000 cash.
12/09/06
STC earned & received $1,000 in cash by providing tutoring services.
12/12/06
STC Billed the RISD $2,500 for tutoring services performed at their school. Payment has not
been received.
12/12/06
STC Purchased $500 of Supplies on Account.
12/21/06
STC Paid $400 Wages to employees.
12/23/06
STC Received $1,500 Cash from RISD for services billed on 12/12/06(#6).
12/29/06
STC Paid a $300 Utility Bill.
Solution
Answer
Accounting Equation: Total Assets = Capital/Equity + Liabilities
Note: After every transaction, A column = B column
Date
Tran saction no
Total Assets
=
Equity
+
Liabilities
TOTAL (B)
Cash
Fixed Assets
