Question

Derrick invested $70,000 cash in the business. Paid $10,000 in cash for equipment. Performed services for cash amounting to $7,000. Paid $1,800 in cash for advertising expense. Paid $1,000 in cash for supplies. Select which two accounts are affected in each of the above transactions.

Answer 1

Answer:

Explanation:

The effect of each transactions are shown below:

The journal entries are shown below:

1. Cash A/c Dr $70,000

        To Derrick's capital A/c $70,000

(Being the invested cash is recorded)

So as we can see that the cash is debited and derrick capital is credited

2. Equipment A/c Dr $10,000

        To Cash A/c $10,000

(Being the equipment is paid for cash)

So as we can see that the equipment is debited and cash is credited

3. Cash A/c Dr $7,000

        To Service revenue A/c $7,000

(Being the cash is received)

So as we can see that the cash is debited and service revenue is credited

4. Advertising expense A/c Dr $1,800

               To Cash A/c $1,800

(Being the advertising expense is paid for cash)

So as we can see that the advertising expense is debited and cash is credited

5. Supplies A/c Dr $1,000

       To Cash A/c $1,000

(Being the supplies are paid in cash)

So as we can see that the supplies are debited and cash is credited