The following selected transactions were completed by Pilgrim Delivery Service during July:
1. Received cash from issuing capital stock, $115,000
2. received cash for providing delivery service, $58,000
3. Paid advertising expense, $2,000
4. Paid creditors on account, $4,800
5. Billed customers for delivery services on account, $31,250
6. Purchased supplies for cash, $800
7. Paid rent for July, $3,000
8. Received cash from customers on account, $10,740
9. determined that the cost of supplies on hand was $135; therefore, $665 of supplies had been used during the month.
10. Paid dividends, $1500
Indicate the effect of each transaction on the accounting equation by listing the numbers identifying the transactions, and insert at the right of each number the appropriate letter from the following list:
a) Increase in an asset, decrease in another asset
b) Increase in an asset, increase in a liability
c) Increase in an asset, increase in stockholders’ equity
d) Decrease in an asset, decrease in a liability
e) Decrease in an asset, decrease in stockholders’ equity
To indicate the effect of each transaction on the accounting equation, we need to identify the accounts involved and determine whether they increase or decrease. Here's a breakdown of each transaction:
1. Received cash from issuing capital stock, $115,000:
- Increase in the asset Cash (+A)
- Increase in stockholders' equity (+SE)
2. Received cash for providing delivery service, $58,000:
- Increase in the asset Cash (+A)
- Increase in stockholders' equity (+SE)
3. Paid advertising expense, $2,000:
- Decrease in the asset Cash (-A)
- Decrease in stockholders' equity (-SE)
4. Paid creditors on account, $4,800:
- Decrease in the asset Cash (-A)
- Decrease in the liability Accounts Payable (-L)
5. Billed customers for delivery services on account, $31,250:
- Increase in the asset Accounts Receivable (+A)
- Increase in stockholders' equity (+SE)
6. Purchased supplies for cash, $800:
- Decrease in the asset Cash (-A)
- Increase in the asset Supplies (+A)
7. Paid rent for July, $3,000:
- Decrease in the asset Cash (-A)
- Decrease in stockholders' equity (-SE)
8. Received cash from customers on account, $10,740:
- Increase in the asset Cash (+A)
- Decrease in the asset Accounts Receivable (-A)
9. Determined that the cost of supplies on hand was $135; therefore, $665 of supplies had been used during the month:
- Decrease in the asset Supplies (-A)
- Decrease in stockholders' equity (-SE)
10. Paid dividends, $1,500:
- Decrease in the asset Cash (-A)
- Decrease in stockholders' equity (-SE)
The corresponding letters from the list for each transaction would be:
1. c)
2. c)
3. e)
4. d)
5. c)
6. e)
7. e)
8. a)
9. e)
10. e)