Question

Analyze the impact of transactions on the accounting equation (LO2-2) Below is a list of activities for Jayhawk Corporation Required: Select from the activities of Jayhawk Corporation whether the transaction increases, decreases, or has no effect on assets, liabilities, and stockholders' equity. The first item is provided as an example,
Transaction Assets = Liabilities + Stockholders +Equity
Increase = No effect + Increase
1. Issue common stock in exchange for cash.
2. Purchase business supplies on account.
3. Pay for legal services for the current month.
4. Provide services to customers on account
5. Pay employee salaries for the current month
6. Provide services to customers for cash.
7. Pay for advertising for the current month
8. Repay loan from the bank
9. Pay dividends to stockholders
10. Receive cash from customers in (4) above-
11. Pay for supplies purchased in (2) above. = -

Answer 1

Answer:

       Transaction                Assets  =    Liabilities  +  Stockholder's

                                                                                        Equity

1  Issue common stock      Increase =   No Effect    +    Increase

  in exchange for cash  

2 Purchase business         Increase  =   Increase    +     No Effect

supplies on account

3 Pay for legal service       Decrease  =  No Effect   +   Decrease  

for the current month

4 Provide services to         Increase    =   No Effect  +    Increase

customer on account

5 Pay employee salaries    Decrease   =  No Effect  +    Decrease  

for the current month    

6  Provide services to        Increase     =   No Effect   +    Increase

customer for cash

7  Pay for advertising        Decrease    =    No Effect   +   Decrease

for the current month

8  Repay loan from            Decrease    =    Decrease  +   No Effect

the bank

9  Pay dividends to           Decrease    =     No Effect  +   Decrease

stockholders

10  Receive cash from      No Effect    =      No Effect   +   No Effect

customer in (4) above

11  Pay for supplies            Decrease   =     Decrease   +   No Effect

purchased in (2) above