Question

The following transactions occur for the Hamilton Manufacturers.

(a) Provide services to customers on account for $4,000.
(b) Purchase equipment by signing a note with the bank for $10,500.
(c) Pay advertising of $1,200 for the current month.
Analyze each transaction and indicate the amount of increases and decreases in the accounting equation.

Answer 1

The answer is stated below:

Step-by-step explanation:

The accounting equation is as follows:

Assets = Liabilities + Stockholders' Equity

Analyzing the transactions:

1. The service is provided to customer on account, which result in increase in assets and the stockholders' equity

So,

Assets = Liabilities + Stockholders' equity

+ $4,000 = $0 + +$4,000

2. The equipment is purchased by signing a note, which result in increase in liability and also increase in the assets.

So,

Assets = Liabilities + Stockholders' equity

+ $10,500 = +$10,500 + $0

3. Paid for the advertising, which result in decrease in cash as well as decrease in the equity of the company.

So,

Assets = Liabilities + Stockholders' equity

- $1,200 = $0 + -$1,200