PE 1-3B Transactions

Interstate Delivery Service is owned and operated by Katie Wyer. The following selected transactions were completed by Interstate Delivery Service during May:

1. Received cash in exchange for common stock, $18,000.

2. Paid advertising expense, $4,850.

3. Purchased supplies on account, $2,100.

4. Billed customers for delivery services on account, $14,700.

5. Received cash from customers on account, $8,200.

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 $18,000; Common Stock increases by $18,000.

Answer:

(2) 

Expense (Advertising Expense) increases by $4,850; 

Asset (Cash) decreases by $4,850. 

(3) 

Asset (Supplies) increases by $2,100; 

Liability (Accounts Payable) increases by $2,100. 

(4) 

Asset (Accounts Receivable) increases by $14,700; 

Revenue (Delivery Service Fees) increases by $14,700. 

(5) 

Asset (Cash) increases by $8,200; 

Asset (Accounts Receivable) decreases by $8,200.