Question

Following the example shown in below, indicate the effects of the listed transactions on the assets, liabilities, and stockholders' equity of McKay & Company:
a. Rendered services to clients for cash. Increase assets,
b. Invested cash in the firm in exchange for common stock.
c. Purchased a document scanner on account.
d. Borrowed cash from a bank and signed a nine-month note.
e. Paid amount due on account for scanner purchased in (c).
f. Rendered services and billed clients.
g. Paid stockholders a cash dividend.
h. Paid interest on a note payable to bank.
i. Received payment from clients billed in (f).

Answer 1

Answer:

a. Increases asset

b. equity increased.

c. Assets increase and liability increased.

d. asset increase and liability increases.

e. Assets decreases and liability decreases

f. Assets increases

g. equity decreases

h. no effect

i. no effect

Explanation:

The transaction incurred by McKay & Company has impact on assets, liabilities and equity. The effect of each transaction is mentioned above. The transaction h and i will have no effect on the accounting equation. the cash received from the client increases cash but the receivables are reduced will off sets the assets side having no impact on accounting equation.