Selected transactions for Warner Advertising Company, Inc., are listed here. Describe the effect of each transaction on assets, liabilities, and stockholders' equity. Issued common stock to investors in exchange for cash received from investors. Paid monthly rent. Received cash from customers when service was performed. Billed customers for services performed. Paid dividend to stockholders. Incurred advertising expense on account. Received cash from customers billed in (4). Purchased additional equipment for cash. Purchased equipment on account.

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Business

Jaylee Chambers

13 October, 06:17

Selected transactions for Warner Advertising Company, Inc., are listed here. Describe the effect of each transaction on assets, liabilities, and stockholders' equity. Issued common stock to investors in exchange for cash received from investors. Paid monthly rent. Received cash from customers when service was performed. Billed customers for services performed. Paid dividend to stockholders. Incurred advertising expense on account. Received cash from customers billed in (4). Purchased additional equipment for cash. Purchased equipment on account.

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Sampson · Answer 1

Issued common stock to investors in exchange for cash received from investors.

This transaction will increase the common stock, that is stockholder's equity and will also increase cash as the common stock is issued against cash.

Therefore, increase in both Asset and Stockholder's Equity.

Paid monthly rent.

This will decrease cash, as paid in cash and will decrease retained earnings which are included in stockholder's equity.

Therefore, decrease in assets and stockholder's equity.

Received cash from customers when service was performed.

Since service is performed, it will generate revenue, accordingly increase in retained earnings and cash,

Therefore, increase stockholder's equity and cash.

Billed customers for services performed.

Billing to customers for the services will increase accounts receivables and will increase revenue.

Therefore, increase in assets and increase in stockholder's equity.

Paid dividend to stockholders.

This will decrease cash and retained earnings as well.

Therefore, decrease in assets and decrease in stockholder's equity.

Incurred advertising expense on account.

Since it is an expense this will decrease retained earnings and provided it is on account, that means not paid, accordingly it will create accounts payable.

Increase in liability, decrease in stockholder's equity.

Received cash from customers billed in (4).

Since cash is received it will increase, and since payment from previously billed customers is received it will decrease accounts receivable, accordingly, an asset will increase with decrease in another.

Therefore, net impact = NIL

Purchased additional equipment for cash.

With acquisition of equipment, there is increase in asset, and with payment in cash there is decrease in asset.

Therefore, net impact = NIL

Purchased equipment on account

This will increase the value of equipment in assets and also since it is purchased on account, it will increase liability in the form of accounts payable.

Therefore, increase in asset and liabilities.