the following transactions occur for the hamilton manufacturers. (a) provide services to customers on…
the following transactions occur for the hamilton manufacturers. (a) provide services to customers on account for $4,800. (b) purchase equipment by signing a note with the bank for $10,100. (c) pay advertising of $1,300 for the current month. analyze each transaction and indicate the amount of increases and decreases in the accounting equation. note: decreases to account classifications should be entered as negative amounts.
Answer
Explanation:
Step1: Analyze transaction (a)
Providing services on account increases accounts receivable (an asset) by $4,800 and increases revenue, which in turn increases stockholders' equity by $4,800. There is no impact on liabilities.
| Transaction | Assets | = | Liabilities | + | Stockholders' Equity |
|---|---|---|---|---|---|
| (a) | $4,800 | = | 0 | + | $4,800 |
Step2: Analyze transaction (b)
Purchasing equipment by signing a note increases equipment (an asset) by $10,100 and also increases notes payable (a liability) by $10,100. There is no impact on stockholders' equity.
| Transaction | Assets | = | Liabilities | + | Stockholders' Equity |
|---|---|---|---|---|---|
| (b) | $10,100 | = | $10,100 | + | 0 |
Step3: Analyze transaction (c)
Paying for advertising decreases cash (an asset) by $1,300 and also decreases retained earnings (part of stockholders' equity) by $1,300 as it is an expense. There is no impact on liabilities.
| Transaction | Assets | = | Liabilities | + | Stockholders' Equity |
|---|---|---|---|---|---|
| (c) | -$1,300 | = | 0 | + | -$1,300 |
Answer:
| Transaction | Assets | = | Liabilities | + | Stockholders' Equity |
|---|---|---|---|---|---|
| (a) | $4,800 | = | 0 | + | $4,800 |
| (b) | $10,100 | = | $10,100 | + | 0 |
| (c) | -$1,300 | = | 0 | + | -$1,300 |