Question

Crane Company, a computer services company, entered into these transactions during May 2017, its first month of operations. 1. Stockholders invested $32,000 in the business in exchange for common stock of the company. 2. Purchased computers for office use (recorded as Equipment) for $26,600 from Ladd on account. 3. Paid $5,500 cash for May rent on storage space. 4. Performed computer services worth $18,400 on account. 5. Performed computer services for Wharton Construction Company for $5,300 cash. 6. Paid Western States Power Co. $8,500 cash for energy usage in May. 7. Paid Ladd for the computers purchased in (2). 8. Incurred advertising expense for May of $1,800 on account. 9. Received $10,200 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 decrea: 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.) Assets = Liabilities + Accounts Receivable + Equipment = Accounts Payable + Common Stock + Cash Stockholders' Equity Retained Earnings Revenues - Expenses 32000 32000

Answer 1

H

Answer :

	Assets					=	Liabilities	+	Stockholders Equity					Explanation
	Cash	+	Accounts Receivable	+	Equipment	=	Accounts Payable	+	Common Stock	+	Retained Earnings
											Revenue	-	Expenses
1.	$   32,000.00								$        32,000.00					Issued shares of common stock for cash
2.					$ 26,600.00		$               26,600.00							Computer purchased on account
3.	$   (5,500.00)												$      5,500.00	Rent expense paid in cash
4.			$                     18,400.00								$      18,400.00			Computer Services performed - Revenue generated on account
5.	$      5,300.00										$         5,300.00			Computer Services performed - Revenue generated in cash
6.	$   (8,500.00)												$      8,500.00	Energy usage expense
7.	$ (26,600.00)						$            (26,600.00)							Paid for Computer Purchased in (2) above
8.							$                 1,800.00						$      1,800.00	Advertising Expenses incurred
9.	$   10,200.00		$                   (10,200.00)											Amount Received for Computer Services Performed (4) above
	$      6,900.00		$                        8,200.00		$ 26,600.00		$                 1,800.00		$        32,000.00		$      23,700.00		$ (15,800.00)

Assets

=

Liabilities

+

Stockholders Equity

Cash

+

Accounts Receivable

+

Equipment

=

Accounts Payable

+

Common Stock

+

Retained Earnings

$      6,900.00

$                        8,200.00

$ 26,600.00

$                 1,800.00

$        32,000.00

$                                         7,900.00

= $ 41,700