Pregunta
During 2022 , its first year of operations as a delivery service, Larkspur Corp. entered into the following transactions.
- Issued shares of common stock to investors in exchange for
- Borrowed
- Purchased delivery trucks for
- Performed services for customers for
- Purchased supplies for
- Paid rent of
- Performed services on account for
- Paid salaries of
- Paid a dividend of
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 margin. (If a transaction results in a decrease in Assets, Liabilities or Stockholders’ Equity, placea
negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.)
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 margin. (If a transaction results in a decrease in Assets, Liabilities or Stockholders’ Equity, placea
negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced.)
Ask by Howell Stanley. in the United States
Jan 24,2025
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| Transaction | Assets | Liabilities | Stockholders’ Equity | Explanation |
|---|---|---|---|---|
| 1. Issued stock for $126,000 cash | Cash + $126,000 | Common Stock + $126,000 | Equity increases | |
| 2. Borrowed $56,700 | Cash + $56,700 | Notes Payable + $56,700 | Liabilities increase | |
| 3. Purchased trucks for $75,600 cash | Delivery Trucks + $75,600 Cash - $75,600 |
No change in equity | ||
| 4. Performed services for $20,160 cash | Cash + $20,160 | Revenues + $20,160 | Equity increases | |
| 5. Purchased supplies on account | Supplies + $5,922 | Accounts Payable + $5,922 | Assets and liabilities increase | |
| 6. Paid rent of $6,552 | Cash - $6,552 | Rent Expense - $6,552 | Equity decreases | |
| 7. Performed services on account for $12,600 | Accounts Receivable + $12,600 | Revenues + $12,600 | Equity increases | |
| 8. Paid salaries of $35,280 | Cash - $35,280 | Salaries Expense - $35,280 | Equity decreases | |
| 9. Paid dividend of $13,860 | Cash - $13,860 | Dividends - $13,860 | Equity decreases |
Summary:
- Assets increased by cash from stock issuance and borrowing, decreased by purchasing trucks and paying rent, salaries, and dividends, and increased by acquiring supplies and accounts receivable.
- Liabilities increased by borrowing and purchasing supplies on account.
- Stockholders’ Equity increased by revenues from services and decreased by expenses and dividends.
This maintains the balance of the accounting equation after each transaction.
Solución
Certainly! Below is a tabular analysis of Larkspur Corp.‘s transactions for 2022, showing their effects on the accounting equation (Assets = Liabilities + Stockholders’ Equity). Explanations for changes to revenues or expenses are provided in the right-hand margin.
| Transaction | Assets | Liabilities | Stockholders’ Equity | Explanation |
|---|---|---|---|---|
| 1. Issued common stock for $126,000 cash | Cash + $126,000 | Common Stock + $126,000 | Issuance of common stock increases equity | |
| 2. Borrowed $56,700 by issuing a note | Cash + $56,700 | Notes Payable + $56,700 | Borrowing funds increases liabilities | |
| 3. Purchased delivery trucks for $75,600 cash | Delivery Trucks + $75,600 Cash − $75,600 |
Exchange of cash for delivery trucks; no effect on equity | ||
| 4. Performed services for customers for $20,160 cash | Cash + $20,160 | Revenues + $20,160 | Revenue earned increases equity | |
| 5. Purchased supplies for $5,922 on account | Supplies + $5,922 | Accounts Payable + $5,922 | Purchase on account increases assets and liabilities | |
| 6. Paid rent of $6,552 | Cash − $6,552 | Rent Expense − $6,552 | Rent expense decreases equity | |
| 7. Performed services on account for $12,600 | Accounts Receivable + $12,600 | Revenues + $12,600 | Revenue earned on account increases equity | |
| 8. Paid salaries of $35,280 | Cash − $35,280 | Salaries Expense − $35,280 | Salaries expense decreases equity | |
| 9. Paid a dividend of $13,860 to shareholders | Cash − $13,860 | Dividends − $13,860 | Dividends reduce equity |
Summary of Effects
-
Assets
- Increased by cash from issuing stock and borrowing.
- Decreased by purchasing trucks, paying rent, salaries, and dividends.
- Increased by acquiring supplies and accounts receivable from services performed on account.
-
Liabilities
- Increased by borrowing (Notes Payable) and purchasing supplies on account (Accounts Payable).
-
Stockholders’ Equity
- Increased by revenues from services performed.
- Decreased by expenses (rent and salaries) and dividends paid to shareholders.
- Increased by issuance of common stock.
This analysis ensures that the accounting equation remains balanced after each transaction.
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Here’s how each transaction affects the accounting equation, which states that Assets = Liabilities + Stockholders’ Equity:
| Transaction | Assets | Liabilities | Stockholders’ Equity | Explanation |
|---|---|---|---|---|
| 1 | +126,000 | +126,000 | Issued common stock for cash. | |
| 2 | +56,700 | +56,700 | Borrowed cash by issuing a note. | |
| 3 | -75,600 | Purchased delivery trucks, an asset. | ||
| 4 | +20,160 | +20,160 | Earned revenue from services performed in cash. | |
| 5 | +5,922 | +5,922 | Purchased supplies on account (increase in A/L). | |
| 6 | -6,552 | -6,552 | Paid rent expense, reducing equity. | |
| 7 | +12,600 | +12,600 | Services performed on account increase revenue. | |
| 8 | -35,280 | -35,280 | Paid salaries, an expense affecting equity. | |
| 9 | -13,860 | -13,860 | Dividends paid to shareholders decrease equity. |
In this table:
- The “+” sign indicates an increase in the corresponding account, while the negative sign “(-)” indicates a decrease.
- Stockholders’ equity may increase with revenues and decreases with expenses and dividends paid.
This structured approach helps maintain a clear understanding of how each transaction influences the essential equation governing financial accounting!
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