
Concept explainers
Transactions
Interstate Delivery Service is owned and operated by Katie Wyer. The following selected transactions were completed by Interstate Delivery during May:
- 1. Received cash in exchange for common stock, $18,000.
- 2. Paid advertising expense, $4,850.
- 3. Purchased supplies on account, $2,100.
- 4. Billed customers for delivery services on account, $14,700.
- 5. Received cash from customers on account. $8,200.
Indicate the effect of each transaction on the following
(1) Asset (Cash) increases by $18,000: Common Stock increases by $18,000.

Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relation between resources or assets of a company and claims of resources to creditors and owners. Accounting equation is expressed as shown below:
To analyze: Business transactions by indicating their effects on accounting equation.
Explanation of Solution
1.
Transaction: Cash of $18,000 received from owner.
Accounting equation effect:
Therefore, Asset (Cash) increases by $18,000; Owners’ equity (KW, Capital) increases by $18,000.
2.
Transaction: Paid cash of $4,850 for on advertising expenses.
Accounting equation effect:
Therefore, Asset (Cash) decreases by $4,850; Owners’ equity (Advertising Expense) decreases by $4,850.
3.
Transaction: Purchased supplies of $2,100 on account.
Accounting equation effect:
Therefore, Asset (Supplies) increases by $2,100; Liabilities (Accounts Payable) increases by $2,100.
4.
Transaction: Performed services of $14,700 on account.
Accounting equation effect:
Therefore, Asset (Accounts Receivable) increases by $14,700; Owners’ equity (Delivery Service Fee) increases by $14,700.
5.
Transaction: Received $8,200 for services performed on account.
Accounting equation effect:
Therefore, Asset (Cash) increases by $8,200; Asset (Accounts Receivable) decreases by $8,200.
Want to see more full solutions like this?
Chapter 1 Solutions
Financial & Managerial Accounting 14th Ed. W/ PAC LMS Intg CNOWv2 2S
Additional Business Textbook Solutions
Marketing: An Introduction (13th Edition)
Principles of Operations Management: Sustainability and Supply Chain Management (10th Edition)
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
PRIN.OF CORPORATE FINANCE
Business in Action
Essentials of MIS (13th Edition)
- Please don't use AI And give correct answer .arrow_forwardLouisa Pharmaceutical Company is a maker of drugs for high blood pressure and uses a process costing system. The following information pertains to the final department of Goodheart's blockbuster drug called Mintia. Beginning work-in-process (40% completed) 1,025 units Transferred-in 4,900 units Normal spoilage 445 units Abnormal spoilage 245 units Good units transferred out 4,500 units Ending work-in-process (1/3 completed) 735 units Conversion costs in beginning inventory $ 3,250 Current conversion costs $ 7,800 Louisa calculates separate costs of spoilage by computing both normal and abnormal spoiled units. Normal spoilage costs are reallocated to good units and abnormal spoilage costs are charged as a loss. The units of Mintia that are spoiled are the result of defects not discovered before inspection of finished units. Materials are added at the beginning of the process. Using the weighted-average method, answer the following question: What are the…arrow_forwardQuick answerarrow_forward
- Financial accounting questionarrow_forwardOn November 30, Sullivan Enterprises had Accounts Receivable of $145,600. During the month of December, the company received total payments of $175,000 from credit customers. The Accounts Receivable on December 31 was $98,200. What was the number of credit sales during December?arrow_forwardPaterson Manufacturing uses both standards and budgets. For the year, estimated production of Product Z is 620,000 units. The total estimated cost for materials and labor are $1,512,000 and $1,984,000, respectively. Compute the estimates for: (a) a standard cost per unit (b) a budgeted cost for total production (Round standard costs to 2 decimal places, e.g., $1.25.)arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax CollegeCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage


