Question

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.

Answer 1

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.