Answer:
The question is not complete.
Here is the complete question:
Keystone Computer Timeshare Company entered into the following transactions during May 2017.
Describe the effect of each transaction on assets, liabilities, and stockholders' equity.
1. Purchased computers for $20,000 from Data Equipment on account. Select an effect
2. Paid $3,000 cash for May rent on storage space. Select an effect
3. Received $15,000 cash from customers for contracts billed in April. Select an effect
4. Performed computer services for Ryan Construction Company for $2,700 cash. Select an effect
5. Paid Midland Power Co. $11,000 cash for energy usage in May. Select an effect
6. Stockholders invested an additional $32,000 in the business. Select an effect
7. Paid Data Equipment for the computers purchased in (1) above.
Select an effect
8. Incurred advertising expense for May of $840 on account.
Here is the answer:
Transaction Effect on asset, liabilities and equity
1 Increase in asset(computer account) by $20,000
and increase in liabilities (account payable) by
$20,000
2 Decrease in asset(cash account) by $3,000 and
decrease in equity (rent expense account) by
$3,000
3. Increase in asset (cash account) by $15,000 and decrease in
asset (account receivable) by $15,000. Net effect is zero.
4. Increase in asset (cash account) by $2,700 and increase in
equity (service revenue account) by $2,700
5. Decrease in asset (cash account) by $11,000 and decrease in
equity (Energy expense account) by $11,000
6. Increase in asset (cash account) by $32,000 and increase in
equity (common stock account) by $32,000
7. Decrease in asset (cash account) by $20,000 and decrease in
liabilities (account payable) by $20,000
8. Increase in liabilities (accrued advertising expense) by $840
decrease in equity (advertising expense account) by $840
Explanation:
Assets are economic resources of the firm in which future economic benefits are expected to flow to the entity. Liabilities are the entity`s financial obligation to those who are not the owners of the business. Equity is the residual value after deducting am entity`s assets from its liabilities.
With this background, business transactions and events are recorded either as increase or decrease in asset, liabilities and equity.
