Question
The following selected transactions were completed by Cota Delivery Service during July:
Indicate the effect of each transaction on the accounting equation by choosing the appropriate letter from the following list:
Increase in an asset, decrease in another asset.
Increase in an asset, increase in a liability.
Increase in an asset, increase in stockholders' equity.
Decrease in an asset, decrease in a liability.
Decrease in an asset, decrease in stockholders' equity.
1. Received cash in exchange for common stock, $50,000.
2. Purchased supplies for cash, $1,800.
3. Paid rent for July, $4,500.
4. Paid advertising expense, $1,200.
5. Received cash for providing delivery services, $11,500.
6. Billed customers for delivery services on account, $33,970.
7. Paid creditors on account, $900.
8. Received cash from customers on account, $27,500.
9. Determined that the cost of supplies on hand was $300 and $1,500 of supplies had been used during the month.
10. Paid cash dividends, $1,000.
Indicate the effect of each transaction on the accounting equation by choosing the appropriate letter from the following list:
Increase in an asset, decrease in another asset.
Increase in an asset, increase in a liability.
Increase in an asset, increase in stockholders' equity.
Decrease in an asset, decrease in a liability.
Decrease in an asset, decrease in stockholders' equity.
1. Received cash in exchange for common stock, $50,000.
2. Purchased supplies for cash, $1,800.
3. Paid rent for July, $4,500.
4. Paid advertising expense, $1,200.
5. Received cash for providing delivery services, $11,500.
6. Billed customers for delivery services on account, $33,970.
7. Paid creditors on account, $900.
8. Received cash from customers on account, $27,500.
9. Determined that the cost of supplies on hand was $300 and $1,500 of supplies had been used during the month.
10. Paid cash dividends, $1,000.
Answers
GPT-4o mini
Let's analyze each transaction and determine its effect on the accounting equation using the options provided:
1. **Received cash in exchange for common stock, $50,000.**
- Effect: **Increase in an asset, increase in stockholders' equity.**
2. **Purchased supplies for cash, $1,800.**
- Effect: **Increase in an asset, decrease in another asset.** (Increase in supplies, decrease in cash)
3. **Paid rent for July, $4,500.**
- Effect: **Decrease in an asset, decrease in stockholders' equity.** (Decrease in cash, decrease in retained earnings due to expense)
4. **Paid advertising expense, $1,200.**
- Effect: **Decrease in an asset, decrease in stockholders' equity.** (Decrease in cash, decrease in retained earnings due to expense)
5. **Received cash for providing delivery services, $11,500.**
- Effect: **Increase in an asset, increase in stockholders' equity.** (Increase in cash, increase in retained earnings)
6. **Billed customers for delivery services on account, $33,970.**
- Effect: **Increase in an asset, increase in stockholders' equity.** (Increase in accounts receivable, increase in retained earnings)
7. **Paid creditors on account, $900.**
- Effect: **Decrease in an asset, decrease in a liability.** (Decrease in cash, decrease in accounts payable)
8. **Received cash from customers on account, $27,500.**
- Effect: **Increase in an asset, decrease in another asset.** (Increase in cash, decrease in accounts receivable)
9. **Determined that the cost of supplies on hand was $300 and $1,500 of supplies had been used during the month.**
- Effect: This is an adjustment and does not involve cash, but it indicates that supplies have been used, affecting retained earnings. However, there is no direct transaction effect.
- For tracking purposes, you might note that it decreases stockholders' equity indirectly through the expense recognized.
10. **Paid cash dividends, $1,000.**
- Effect: **Decrease in an asset, decrease in stockholders' equity.** (Decrease in cash, decrease in retained earnings)
Here is a summary of the effects on the accounting equation for each transaction:
1. C
2. A
3. E
4. E
5. C
6. C
7. D
8. A
9. No direct effect or adjustment
10. E
If you need more information or explanations, feel free to ask!
1. **Received cash in exchange for common stock, $50,000.**
- Effect: **Increase in an asset, increase in stockholders' equity.**
2. **Purchased supplies for cash, $1,800.**
- Effect: **Increase in an asset, decrease in another asset.** (Increase in supplies, decrease in cash)
3. **Paid rent for July, $4,500.**
- Effect: **Decrease in an asset, decrease in stockholders' equity.** (Decrease in cash, decrease in retained earnings due to expense)
4. **Paid advertising expense, $1,200.**
- Effect: **Decrease in an asset, decrease in stockholders' equity.** (Decrease in cash, decrease in retained earnings due to expense)
5. **Received cash for providing delivery services, $11,500.**
- Effect: **Increase in an asset, increase in stockholders' equity.** (Increase in cash, increase in retained earnings)
6. **Billed customers for delivery services on account, $33,970.**
- Effect: **Increase in an asset, increase in stockholders' equity.** (Increase in accounts receivable, increase in retained earnings)
7. **Paid creditors on account, $900.**
- Effect: **Decrease in an asset, decrease in a liability.** (Decrease in cash, decrease in accounts payable)
8. **Received cash from customers on account, $27,500.**
- Effect: **Increase in an asset, decrease in another asset.** (Increase in cash, decrease in accounts receivable)
9. **Determined that the cost of supplies on hand was $300 and $1,500 of supplies had been used during the month.**
- Effect: This is an adjustment and does not involve cash, but it indicates that supplies have been used, affecting retained earnings. However, there is no direct transaction effect.
- For tracking purposes, you might note that it decreases stockholders' equity indirectly through the expense recognized.
10. **Paid cash dividends, $1,000.**
- Effect: **Decrease in an asset, decrease in stockholders' equity.** (Decrease in cash, decrease in retained earnings)
Here is a summary of the effects on the accounting equation for each transaction:
1. C
2. A
3. E
4. E
5. C
6. C
7. D
8. A
9. No direct effect or adjustment
10. E
If you need more information or explanations, feel free to ask!