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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Transactions

The following selected transactions were completed by Cota Delivery Service during July:

  1. 1. Received cash from owner as additional investment, $35,000.
  2. 2. Purchased supplies for cash, $1,100.
  3. 3. Paid rent for October, $4,500.
  4. 4. Paid advertising expense, $900.
  5. 5. Received cash for providing delivery services, $33,000.
  6. 6. Billed customers for delivery services on account, $58,000.
  7. 7. Paid creditors on account, $2,900.
  8. 8. Received cash from customers on account, $27,500.
  9. 9. Determined that the cost of supplies on hand was $300 and $8,600 of supplies had been used during the month.
  10. 10. Paid cash to owner for personal use, $2,500.

Indicate the effect of each transaction on the accounting equation by listing the numbers identifying the transactions, (1) through (10), in a column, and inserting at the right of each number the appropriate letter from the following list:

  1. a. Increase in an asset, decrease in another asset.
  2. b. Increase in an asset, increase in a liability.
  3. c. Increase in an asset, increase in owner’s equity.
  4. d. Decrease in an asset, decrease in a liability.
  5. e. Decrease in an asset, decrease in owner’s equity.

To determine

Accounting equation:

Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:

Assets = Liabilities + Owners' Equity

To indicate: The effect of given transactions on accounting equation

Explanation
  1. 1. (c) Received cash from owner as additional investment, $35,000. In assets cash increases by $35,000; Owners’ equity increases by $35,000.
  1. 2. (b) Purchased supplies for cash, $1,100. In assets cash decreases by $1,100, while supplies increases by $1,100.
  1. 3. (b) Paid rent for October, $4,500. In assets cash decreases by $4,500, while prepaid rent increases by $4,500.
  1. 4. (e) Paid advertising expense, $900. In assets cash decreases by $900, while owner's equity decreases by $900.
  1. 5. (c) Received cash for providing delivery services, $33,000. In assets cash increases by $33,000, while owner's equity increases by $33,000.
  1. 6. (c) Billed customers for delivery services on account, $58,000...

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