Question

Pharoah Company entered into these transactions during May 2022, its first month of operations. 1. Stockholders invested $43,500 in the business in exchange for common stock of the company. 2. Purchased computers for office use for $34,600 from Ladd on account. 3. Paid $4,400 cash for May rent on storage space. 4. Performed computer services worth $19,400 on account. 5. Performed computer services for Wharton Construction Company for $5,100 cash. 6. Paid Western States Power Co. $7,200 cash for energy usage in May. 7. Paid Ladd for the computers purchased in (2). 8. Incurred advertising expense for May of $2,400 on account. 9. Received $10,500 cash from customers for contracts billed in (4). Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to revenues or expenses in the far right column. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3-4 for example.) Stockholders' Equity Assets Liabilities Accounts Accounts Common + Equipment = Retained Earnings Cash Receivable Payable Stock Revenues Expenses (1) (2) (3) (4) (5) (6) (7) (8) (9)

Answer 1

The transactions listed impact the accounting equation by reflecting investments, purchases, service income, payments, and expenses - all of which change the company's assets, liabilities, and stockholders' equity.

Step-by-step explanation:

The student's question is asking for an analysis of a series of transactions for Pharoah Company, showing the impact on the accounting equation (Assets = Liabilities + Stockholders' Equity).

1. Stockholders invested $43,500 cash for common stock, increasing assets and equity.
2. Purchased equipment on account for $34,600, increasing equipment assets and accounts payable.
3. Paid cash for rent, decreasing cash and increasing expenses which decreases retained earnings.
4. Performed services on account, increasing accounts receivable and revenues, which increases retained earnings.
5. Performed cash services, increasing cash and revenues, thus increasing retained earnings.
6. Paid for energy usage in cash, a decrease in cash and an increase in expenses.
7. Paid for the computers, reducing cash and decreasing accounts payable.
8. Incurred advertising expenses on account, increasing expenses and accounts payable.
9. Received cash from customers on account, increasing cash and decreasing accounts receivable.

This ledger of transactions reflects how Pharoah Company's opening activities affect its financial position, as registered in their accounts and as seen in changes to the company's overall financial health.