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18 January, 17:19

Keystone Computer Timeshare Company entered into the following transactions during May 2017. Describe the effect of each transaction on assets, liabilities, and stockholders' equity. 1. Purchased computers for $20,000 from Data Equipment on account. 2. Paid $3,000 cash for May rent on storage space. 3. Received $15,000 cash from customers for contracts billed in April. 4. Performed computer services for Ryan Construction Company for $2,700 cash. 5. Paid Midland Power Co. $11,000 cash for energy usage in May. 6. Stockholders invested an additional $32,000 in the business. 7. Paid Data Equipment for the computers purchased in (1) above. 8. Incurred advertising expense for May of $840 on account.

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Answers (1)
  1. 18 January, 18:03
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    The change in each transaction is indicated by the bold letter. Also the numerical value has benn added or subtracted. At each transaction the total of the assets and the total of the liabilities and Owner's equity remains the same.

    Explanation:

    Keystone Computer Timeshare Company

    Assets = Liabilities + Owner's Equity

    1. + Computers = + Accounts Payable

    +$20,000 = + $20,000 + Owner's Equity

    2. - Cash + Computers = + Accounts Payable + Owner's Equity - Expense

    -3000 + 20,000 = + 20,000 + OE - 3000

    3. + Cash + Computers - Accounts Receivable = + Accounts Payable + Owner's Equity - Expense

    12,000 + 20,000 - (15000) = + 20,000 + OE - 3000

    4. + Cash + Computers - Accounts Receivable = + Accounts Payable + Owner's Equity - Expense + revenue

    12,000+2700 + 20,000 - (15000) = + 20,000 + OE - 3000 + 2700

    5. - Cash + Computers - Accounts Receivable = + Accounts Payable + Owner's Equity - Expense + revenue

    1,000+2700 + 20,000 - (15000) = + 20,000 + OE - 3000 + 2700 - 11000

    6. + Cash + Computers - Accounts Receivable = + Accounts Payable + Owner's Equity - Expense + revenue

    33000+2700 + 20,000 - (15000) = + 20,000 + 32000 - 14000 + 2700

    7. - Cash + Computers - Accounts Receivable = - Accounts Payable + Owner's Equity - Expense + revenue

    13000+2700 + 20,000 - (15000) = 32000 - 14000 + 2700

    8. Cash + Computers - Accounts Receivable = + Accounts Payable Owner's Equity - Expense + revenue

    13000+2700 + 20,000 - (15000) = 840 + 32000 - 14000 + 2700 - 840

    13000+2700 + 20,000 - (15000) = 840 + 19,860

    Assets = Liabilities + Owner's Equity

    20,700 = 840 + 19,860
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Home » Business » Keystone Computer Timeshare Company entered into the following transactions during May 2017. Describe the effect of each transaction on assets, liabilities, and stockholders' equity. 1. Purchased computers for $20,000 from Data Equipment on account.
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