Question

Sandhill Co. entered into these transactions during May 2022, its first month of operations.

1. Stockholders invested $37,000 in the business in exchange for common stock of the company.
2. Purchased computers for office use for $33,500 from Ladd on account.
3. Paid $2,500 cash for May rent on storage space.
4. Performed computer services worth $18,400 on account.
5. Performed computer services for Wharton Construction Company for $6,300 cash.
6. Paid Western States Power Co. $6,200 cash for energy usage in May.
7. Paid Ladd for the computers purchased in (2).
8. Incurred advertising expense for May of $3,200 on account.
9. Received $12,500 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.)

Answer 1

Answer and Explanation:

The transactions 3 6 and 8 represents that the expenses are incurred which results in increased and expenses and the transaction 4 and 5 shows that there is an increased in revenue

The journal entry is shown below:

For transaction 3

Rent expense

To Cash

(Being the rent expense is paid for cash is recorded)

As the expense has debit balance so it would be increased

For transaction 6

Electricity expenses Dr

To Cash

(Being the energy usage is paid for cash is recorded)

As the expense has debit balance so it would be increased

For transaction 8

Advertising expense Dr

To Account payable

(Being the advertising expense is recorded)

As the expense has debit balance so it would be increased

For transaction 4

Account receivable Dr

To Service revenue

(Being the service is provided)

As the revenue has credit balance so it would be increased

For transaction 5

Cash Dr

To Service revenue

(Being the service provided is recorded)

As the revenue has credit balance so it would be increased

The attachment is provided for better understanding

The other transactions represent the assets, liabilities and stockholder equity