Question

E1-7 Keystone Computer Timeshare Company entered into the following transactions during May 2017 1. Purchased computers for $20,000 from Data Equipment on account. 2. Paid $3,000 cash for May rent on storage space. 3. Received $15,000 cash from customers for contracts billed in April. 4. Performed computer services for Ryan Construction Company for $2,700 cash. 5. Paid Midland Power Co. $11,000 cash for energy usage in May. 6. Stockholders invested an additional $32,000 in the business 7. Paid Data Equipment for the computers purchased in (1) above. 8. Incurred advertising expense for May of $840 on account. Instructions Indicate with the appropriate letter whether each of the transactions results in: (a) An increase in assets and a decrease in assets. (b) An increase in assets and an increase in stockholders' equity. (c) An increase in assets and an increase in liabilities. (d) A decrease in assets and a decrease in stockholders' equity. (e) A decrease in assets and a decrease in liabilities. (f) An increase in liabilities and a decrease in stockholders' equity (g) An increase in stockholders' equity and a decrease in liabilities.

Please explain what answers

Answer 1

Nos	Particulars		Nos	Particulars
1	Purchased computers for $ 20,000 from data equipment on account	(c) An increase in assets and an increase in liabilities Since the purchase of computers increases the fixed assets and thereby increasing the assets and since it is purchased on account ,there is an increase in the current liabilities and thereby increasing the liabilities.	5	Paid Midland power company $11000 cash for energy usage in may	(d) A decrease in assets and a decrease in stockholders equity. Since expenses of may are paid in cash there is an decrease in current assets and therefore a decrease in the total assets and since expense results in a reduction in the net income it thereby results an decrease in shareholders equity.
2	Paid $ 3000 cash for may rent on storage space	(d) A decrease in assets and a decrease in stockholders equity Since expenses of may are paid in cash there is an decrease in current assets and thereby a decrease in total assets and since expense results in a reduction in the net income it thereby results an decrease in shareholders equity.	6	Stockholders invested an additional $32000 in the business	(a ) An increase in assets and a decrease in assets.Received cash from customers as cash received increases the cash and thereby the current assets and a reduction in the customers and therefore reduction in debtors and again a reduction in current assets and a reduction in the total assets.
3	Received $ 15,000 cash from customers for contracts billed in april	(a ) An increase in assets and a decrease in assets.Received cash from customers as cash received increases the cash and thereby the current assets and a reduction in the customers and therefore reduction in debtors and again a reduction in current assets and a reduction in the total assets.	7	Paid Data Equipment for the computers purchased in (1) above	(e ) A decrease in assets and a decrease in the liabilities. Paying cash for the equipment results in a reduction in the current assets and thereby reducing the total assets and payment to creditors since previously equipment was purchased on account will lead to reduction in the current liabilities and therefore reduction in the total liabilities.
4	Performed computer services for Ryan Construction Company for $ 2700 cash	(b) An increase in assets and an increase in the stockholders equity Received cash for services rendered and thereby increasing the cash received and the current assets and therefore an increase in the total assets and Rendering services results in an increase in the sale of services thereby increasing the net income and thereby the stockholders equity.	8	Incurred Advertising expense for May of $ 840 on account	(f )An increase in liability and a decrease in stockholder’s equity. Payment of may advertising expense results in an expense and therefore a reduction in the net income and therefore a reduction in the equity and increase in the sundry creditors and thereby an increase in the current liabilities.