Answered Essay: Exercise 3-2 Blossom Company entered into these transactions during May 2017, its first month of oper

Exercise 3-2 Blossom Company entered into these transactions during May 2017, its first month of operations. 1. Stockholders invested $33,500 in the business in exchange for common stock of the company 2. Purchased computers for office use for $27,200 from Ladd on account. 3. Paid $3,700 cash for May rent on storage space. 4. Performed computer services worth $18,000 on account. 5. Performed computer services for Wharton Construction Company for $3,200 cash. 6. Paid Western States Power Co. $8,900 cash for energy usage in May. 7. Paid Ladd for the computers purchased in (2). 8. Incurred advertising expense for May of $1,700 on account. 9. Received $13,700 cash from customers for contracts billed in (4). Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders’ Equity in the far right column. (If a transaction causes a decrease in Assets, Liabilities or Stockholders’ Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3-3 for example.) Assets = Liabilities + Stockholders’ Equity Cash + Accounts Receivable + Equipment = Accounts Payable + Common Stock + Retained Earnings Revenues – Expenses (1) $ $ $ $ $ $ $ (2) (3) (4) (5) (6) (7) (8) (9) $ $ $ = $ $ $ $

Expert Answer

 

No. Account Title Debit Credit Asset= Liab.+ Sh. Eq. Cash+ Acc.Rec.+ Equip.= Acc.Pay.+ Co.stock+ Ret.earn. Comments
1 Cash 33500 33500 33500
Common stock 33500 33500
2 Office Equipment 27200 27200 27200
Account Payable 27200 27200 27200
3 Rent expense 3700 -3700 -3700 Decreases R/E
Cash 3700 -3700 -3700
4 Account receivable 18000 18000
Service Revenue 18000 18000 18000
18000 Increases R/E
5 Cash 3200 3200 3200
Service Revenue 3200 3200 3200 Increases R/E
6 Electricity charges exp. 8900 -8900 -8900 Decreases R/E
Cash 8900 -8900 -8900
7 Account Payable 27200 -27200 -27200
Cash 27200 -27200 -27200
8 Advertising Expense 1700 -1700 -1700 Decreases R/E
Cash 1700 -1700 -1700
9 Cash 13700 13700 13700
Account receivable 13700 -13700 -13700
137100 137100 40400 27200 -20300 12600 600 27200 0 33500 6900 Increases R/E
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