Question

The following events apply to Kate Enterprises:______.

Collected $16,200 cash for services to be performed in the future. Acquired $50,000 cash from the issue of common stock. Paid salaries to employees: $3,500 cash. Paid cash to rent office space for the next 12 months: $12,000. Paid cash of $17,500 for other operating expenses. Paid on accounts payable: $1,752. Paid cash for utilities expense: $804. Recognized $45,000 of service revenue on account. Paid a $2,500 cash dividend to the stockholders. Purchased $3,200 of supplies on account. Received $12,500 cash for services rendered. Recognized $5,200 of accrued salaries expense. Recognized $3,000 of rent expense. Cash had been paid in a prior transaction (see Event 4). Recognized $5,000 of revenue for services performed. Cash had been previously collected (see Event 1).
Required:
Identify each event as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also identify the account that is to be debited and the account that is to be credited when the transaction is recorded.
Event No. Type of Event Account Debited Account Credited
1 AS Cash Common Stock
The first event is recorded as an example.

Answer 1

Kate Enterprises

Event No. Type of Event Account Debited Account Credited

1 AS Cash Common Stock

2. AS Cash Service Revenue

3. AU Salaries Expense Cash

4. AE Prepaid Rent Cash

5. AU Other operating exp. Cash

6. AU Accounts payable Cash

7. AU Utilities Expense Cash

8. AS Accounts Receivable Service Revenue

9. AU Dividends Cash

10. AS Supplies Accounts Payable

11. AS Cash Service Revenue

12. AE Salaries Expense Salaries Payable

13. AE Rent Expense Rent Payable

14. AE Unearned revenue Earned Revenue

Step-by-step explanation:

Asset source (AS) = increases an asset and a claim on the asset

Asset use (AU) = decreases an asset and a claim on the asset

Asset exchange (AE) = does not change the value of assets or claims

Claims exchange (CE) = decreases one claim account and decreases another.