Question

Tiny Town Kennel earns service revenue by caring for the pets of customers. Tiny Town Kennel is organized as a corporation. During the past month, Tiny Town Kennel has the following transactions: a. Received $520 cash for service revenue earned. b. Paid $325 cash for salaries expense. c. Received a $1,000 contribution in exchange for common stock. d. Earned $640 for service revenue, but the customer has not paid Tiny Town Kennel yet. e. Received utility bill of $85, which will be paid next month. f. Cash dividends of $100 were paid to stockholders. Indicate the effects of the business transactions on the accounting equation for Tiny Town Kennel. Transaction (a) is answered as a guide. a. Increase asset (Cash); Increase equity Service Revenne)

Answer 1

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Tiny Town Kennel
a. Received $ 520 cash for service revenue earned.
Asset (cash) will increase and Equity (Revenue) will increase.
b. Paid $ 325 cash for salaries expense.
Asset (cash) will decrease and Equity will decrease because expense will increase.
c. Received $ 1000 contribution in exchange for common stock.
Asset (cash) will increase and Equity (common stock) will increase.
d. Earned $ 640 for service revenue, but the customer has not paid Tiny Town Kennel Yet.
Asset (accounts receivable) will increase and Equity (Revenue) will increase.
e. Received utility bill of $ 85, which will be paid next month.
Liability (accounts payable) will increase and Equity will decrease because expense will increase.
f. Cash dividends of $ 100 were paid to stockholders.
Asset (cash) will decrease and Equity will decrease.