Question

Below are various transactions that a local corporation had occur during the month. For each transaction, indicate the transaction's effect on the company's accounting equation by selecting either increase, decrease, or no effect under each area of the accounting equation. Do not leave any of the fields below blank. (Note: If the transaction were to cause an increase and decrease to the same area of the accounting equation, "no effect" should be chosen as the overall effect to that area) A. Received $50,000 in cash from the sale of its common stock to stockholders. B. Borrowed $20,000 from the local bank by signing a note promising to pay back the $20,000 loan plus interest in two years. C. Provided services to customers for $5,000 on account. D. Paid $400 for utility costs. E. Received $5,000 from the customers in "C" above. F. Received $3,000 from customers for services to be performed in the future. G. Purchased supplies costing $500 on account. H. Paid cash dividends of $1,000 to stockholders. Assets Liabilities Stockholders' Equity A. Answer Answer Answer B. Answer Answer Answer C. Answer Answer Answer D. Answer Answer Answer E. Answer Answer Answer F. Answer Answer Answer G. Answer Answer Answer H. Answer Answer Answer

Answer 1

The effect of each transaction on the company's accounting equation is explained step by step.

Step-by-step explanation:

To determine the effect of each transaction on the company's accounting equation, we need to understand the components of the accounting equation. The accounting equation is Assets = Liabilities + Stockholders' Equity.

A. Received $50,000 in cash from the sale of its common stock to stockholders:

- Assets: Increase by $50,000 (cash)

- Liabilities: No effect

- Stockholders' Equity: Increase by $50,000 (common stock)

B. Borrowed $20,000 from the local bank by signing a note:

- Assets: Increase by $20,000 (cash)

- Liabilities: Increase by $20,000 (notes payable)

- Stockholders' Equity: No effect

C. Provided services to customers for $5,000 on account:

- Assets: Increase by $5,000 (accounts receivable)

- Liabilities: Increase by $5,000 (accounts payable)

- Stockholders' Equity: No effect

D. Paid $400 for utility costs:

- Assets: Decrease by $400 (cash)

- Liabilities: No effect

- Stockholders' Equity: No effect

E. Received $5,000 from customers in "C" above:

- Assets: Decrease by $5,000 (accounts receivable)

- Liabilities: Decrease by $5,000 (accounts payable)

- Stockholders' Equity: No effect

F. Received $3,000 from customers for services to be performed in the future:

- Assets: Increase by $3,000 (cash)

- Liabilities: No effect

- Stockholders' Equity: Increase by $3,000 (unearned revenue)

G. Purchased supplies costing $500 on account:

- Assets: Increase by $500 (supplies)

- Liabilities: Increase by $500 (accounts payable)

- Stockholders' Equity: No effect

H. Paid cash dividends of $1,000 to stockholders:

- Assets: Decrease by $1,000 (cash)

- Liabilities: No effect

- Stockholders' Equity: Decrease by $1,000 (dividends)

Answer 2

A

assets increase

equity increase

B

assets increase

liability increase

C

assets increase

equity increase

D

assets decrease

equity decrease

E

no effect

F

assets increase

liability increase

G

assets increase

liability increase

H

assets decrease

equity decrease

Step-by-step explanation:

A. Received $50,000 in cash from the sale of its common stock to stockholders.

The cash is an asset and the common stock equity account.

B. Borrowed $20,000 from the local bank by signing a note promising to pay back the $20,000 loan plus interest in two years.

we receive acash which is asset

and the note will a liaiblity.

C. Provided services to customers for $5,000 on account.

service revenue increase the equity

teh account of the custoemr is a right to claim the invoice in the near future, it is an asset

D. Paid $400 for utility costs.

the expense on utilities decrease the equity

and the cash decrease therefore, assets decrease

E. Received $5,000 from the customers in "C" above

there is no change, we trade one assets, accounts receivable for another, cash.

F. Received $3,000 from customers for services to be performed in the future.

this payment in advance generates an obligtion to do the job in the future, it is not revnue It is a liability

G. Purchased supplies costing $500 on account.

supplies which are assets increase along with the account payable, which is a liability

H. Paid cash dividends of $1,000 to stockholders.

the cash used to pay the stockholders leaves teh company.

the company has less assets

and also less euqity as this is taken from the earnings of the business.