Question

Wildhorse Co., a computer services company, entered into these transactions during May 2017, its first month of operations.

1. Stockholders invested $33,000 in the business in exchange for common stock of the company.

2. Purchased computers for office use (recorded as Equipment) for $26,900 from Ladd on account.

3. Paid $3,100 cash for May rent on storage space.

4. Performed computer services worth $15,300 on account.

5. Performed computer services for Wharton Construction Company for $3,500 cash.

6. Paid Western States Power Co. $8,700 cash for energy usage in May.

7. Paid Ladd for the computers purchased in (2).

8. Incurred advertising expense for May of $3,400 on account.

9. Received $11,100 cash from customers for contracts billed in (4).

Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to revenues or expenses in the right-hand column. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.)

Also classify each entry accordingly advertising expense / service revenue /rent expense or utility expense )

Assets

=

Liabilities

+

Stockholders’ Equity

Cash + Accounts Receivable + Equipment = Accounts Payable + Common Stock +

Retained Earnings

Revenues - Expenses

  

Answer 1

	Assets					=	liability	+	Stack Holders Equity					Explanation
	Cash	+	Accounts receivables	+	Equipment	=	Accounts Payable	+	Common stock	+	Retained Earnings
											Revenues	-	Expenses
1	33,000								33,000					Common Stock for Cash
2					26,900		26,900							Brought Equipment on accounts
3	-3100												3100	Storage Rent Paid
4			15,300								15,300			Revenue from computer service On accounts
5	3500										3500			Revenue from computer service for cash
6	-8700												8700	Paid For Utility Expense
7	-26900						-26900							Paid for computer purchased on accounts in 2nd row
8							3400						3400	Incurred Advertising expenses on accounts
9	11,100		-11,100											Cash received 11,100 out of 15,300 for the computer services which was performed on accounts
	40,000					=	3400	+	36,600