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The selected transactions below were completed by Cota Delivery Service during July: Indicate the effect of each transaction on the accounting equation by choosing the appropriate letter from the following list:

Increase in an asset, decrease in another asset. Increase in an asset, increase in a liability. Increase in an asset, increase in stockholders' equity. Decrease in an asset, decrease in a liability. Decrease in an asset, decrease in stockholders' equity.
1. Received cash in exchange for common stock, $35,000.
2. Purchased supplies for cash, $1,100.
3. Paid rent for October, $4,500.
4. Paid advertising expense, $900.
5. Received cash for providing delivery services, $33,000.
6. Billed customers for delivery services on account, $58,000.
7. Paid creditors on account, $2,900.
8. Received cash from customers on account, $27,500.
9. Determined that the cost of supplies on hand was $300 and $8,600 of supplies had been used during the month.
10. Paid cash dividends, $2,500.
Indicate the effect of each transaction on the accounting equation by listing the numbers identifying the transactions, (1) through (10), in column, and inserting at the right of each number the appropriate letter form the following list:
a. Increase in the asset, decrease in another asset.
b. Increase in and asset, increase in a liability.
c. Increase in an asset, increase in stockholders' equity.
d. Decrease in an asset, decrease in a liability.
e. Decrease in an asset, decrease in stockholders' equity.

1 Answer

5 votes

Answer:

1.c

2.a

3.e

4.e

5.c

6.c

7.d

8.a

9.e

10.e

Step-by-step explanation:

First it is important to know and understand the definition of Asset, Liability and stockholders' equity. Then establish if these elements increase or decrease in a transaction.

Assets are economic resources controlled by a company as a result of past events from which economic benefits are expected to flow into the entity.

Liabilities are present obligation that arises as a result of past event settlement of which would result in outflow of economic benefits from the entity.

Stockholders equity is the residue in Assets after removing the liabilities.

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