Question

Pharoah Company entered into these transactions during May 2022, its first month of operations. 1. Stockholders invested $43,500 in the business in exchange for common stock of the company. 2. Purchased computers for office use for $34,600 from Ladd on account. 3. Paid $4,400 cash for May rent on storage space. 4. Performed computer services worth $19,400 on account. 5. Performed computer services for Wharton Construction Company for $5,100 cash. 6. Paid Western States Power Co. $7,200 cash for energy usage in May. 7. Paid Ladd for the computers purchased in (2). 8. Incurred advertising expense for May of $2,400 on account. 9. Received $10,500 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 far right 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. See Illustration 3-4 for example.) Stockholders' Equity Assets Liabilities Accounts Accounts Common + Equipment = Retained Earnings Cash Receivable Payable Stock Revenues Expenses (1) (2) (3) (4) (5) (6) (7) (8) (9)

Answer 1

Stockholders' Equity Liabilities Assets %3D Accounts + Receivables Accounts Notes Common + Equipment = Payable Cash + Supplies + Stock Dividends |+ Payable +Revenue Expenses + $ 43,500.00 43,500.00 + %3D + $ 34,600.00 + = $ 34,600.00 + 4,400.00 Expense increased Revenue Increased Revenue Increased 7,200.00 Expense increased 3 $ (4,400.00) + + $ 19,400.00 + + $ 19,400.00 5,100.00 2$ 4 5 $ 5,100.00 + (7,200.00) + (34,600.00) + %3D |= $ (34,600.00) + $ 2,400.00 + 2,400.00 Expense increased %3D 10,500.00 + $ (10,500.00) + %3D 12,900.00 + $ 8,900.00 + $34,600.00 + $ = $ 2,400.00 + $ + $43,500.00 |+ $24,500.00 - $ 14,000.00 2$ Bal.