Question

During 2017, its first year of operations as a delivery service, Sarasota Corp. entered into the following transactions.

1. Issued shares of common stock to investors in exchange for $103,000 in cash.
2. Borrowed $45,000 by issuing bonds.
3. Purchased delivery trucks for $61,000 cash.
4. Received $18,000 from customers for services performed.
5. Purchased supplies for $4,900 on account.
6. Paid rent of $5,400.
7. Performed services on account for $12,000.
8. Paid salaries of $26,100.
9. Paid a dividend of $11,200 to shareholders.
Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes Liabilities or Stockholders' Equity in the far right column.

Answer 1

1. Capital will Increase and Asset will increase

2. Cash in the Assets will increase and liability will increase

3. Assets increase and decrease off sets the effect on equation

4. Asset will increase and capital will increase

5. Asset will increase and liability will increase

6. Asset increase and decrease will offset

7. Asset will increase and liability will increase

8. Asset decreases

9. Asset decrease and capital will decrease

Step-by-step explanation:

Accounting equation is Asset = Liabilities + Capital

Accounting equation is affected in business transaction. The Increase in the side will lead to increase in either liability or capital. There are some transactions which just involve asset side transaction which means there will be increase and decrease on the same account this will offset the balance and no effect on equation.