PE 1-3A Transactions

Arrowhead Delivery Service is owned and operated by Gates Deeter. The following selected transactions were completed by Arrowhead Delivery Service during August:

1. Received cash in exchange for common stock, $25,000.

2. Paid creditors on account, $3,750.

3. Billed customers for delivery services on account, $22,400.

4. Received cash from customers on account, $11,300.

5. Paid dividends, $6,000.

Indicate the effect of each transaction on the following accounting equation elements: 

Assets, Liabilities, Common Stock, Dividends, Revenue, and Expense. To illustrate, the answer to (1) follows:(1) Asset (Cash) increases by $25,000; Common Stock increases by $25,000.

Answer:

(2) 

Asset (Cash) decreases by $3,750; 

Liability (Accounts Payable) decreases by $3,750. 

(3) 

Asset (Accounts Receivable) increases by $22,400; 

Revenue (Delivery Service Fees) increases by $22,400. 

(4) 

Asset (Cash) increases by $11,300; 

Asset (Accounts Receivable) decreases by $11,300. 

(5) 

Asset (Cash) decreases by $6,000; 

Dividends increases by $6,000.