Question

For each activity, select the impact on the accounting equation. After doing all transactions, ensure that the accounting equation remains in balance. The first item is provided as an example. (Decreases to accounts should be entered as a negative.)
Transaction Assets Liabilities + Stockholders' Equity
1. Issue common stock in exchange for cash, $15,000. 15,000 0 15,000
2. Obtain a loan from the bank for $9,000.
3. Receive cash of $1,200 in advance from customers.
4. Purchase supplies on account, $2,400.
5. Pay one year of rent in advance, $12,000.
6. Provide services to customers on account, $3,000.
7. Repay $4,000 of the loan in (2) above.
8. Pay the full amount for supplies purchased in (4) above.
9. Provide services to customers in (3) above.
10. Pay cash dividends of $1,000 to stockholders.
Totals

Answer 1

Answer:

Impact of Transactions on the Accounting Equation:

Transaction                       Assets = Liabilities + Stockholders' Equity

1.                                        15,000 =   0                       15,000

2.                                        9,000 =   9,000                 0

3.                                         1,200 =    1,200                 0

4.                                        2,400 =   2,400                 0

5.                        -12,000+12,000 =  0                         0

6.                                        3,000 =  0                         3,000

7.                                       -4,000 =  -4,000                 0

8.                                      -2,400 =  -2,400                  0

9.                                              0 =   -1,200                  1,200

10.                                    -1,000 =    0                        -1,000

Totals                          $23,200 = $5,000             $18,200

Explanation:

a) Data and Analysis:

1. Cash, $15,000 Common Stock

2. Cash $9,000 Bank Loan $9,000

3. Cash $1,200 Deferred Revenue $1,200

4. Supplies $2,400 Accounts Payable $2,400

5. Prepaid Rent $12,000 Cash $12,000

6. Accounts Receivable $3,000 Service Revenue $3,000

7. Bank Loan $4,000 Cash $4,000

8. Accounts Payable $2,400 Cash $2,400

9. Deferred Revenue $1,200 Service Revenue $1,200

10. Dividends $1,000 Cash $1,000