Q4TI
Question
Using the information provided, analyze the effects of Lawlor Lawn Service’s transactions on the accounting equation. May 1 Received \(1,700 and issued common stock. May 3 Purchased a mower on account, \)1,440. May 5 Performed lawn services for client on account, \(200. May 17 Paid \)60 cash for gas used in mower. May 28 Paid cash dividends of $300.
Step-by-Step Solution
VerifiedAssets | = | Liabilities | + | EQUITY | |||||||||||
| Contributed Capital | + | Retained Earnings | |||||||||||||
| Cash | + | Accounts Receivable | + | Equipment | = | Accounts Payable | + | Common Stock | - | Dividends | + | Revenues | - | Expenses | |
May 1 | +1,700 | = | +1,700 | ||||||||||||
Bal. | $1,700 | = | $1,700 | ||||||||||||
May 3 | +1,440 | = | +1,440 | ||||||||||||
Bal. | $1,700 | + | $1.440 | = | $1,440 | + | $1,700 | ||||||||
May 5. | +200 | = | +200 | ||||||||||||
Bal. | $1,700 | + | $200 | + | $1,440 | = | $1,440 | $1,700 | + | $200 | |||||
May 17 | -60 | = |
| -60 | |||||||||||
Bal. | $1,640 | + | $200 | + | $1,440 | = | $1,440 | + | $1,700 | + | $200 | - | $60 | ||
May 28 | -300 | = | -300 | ||||||||||||
Bal. | $1,340 | + | $200 | + | $1,440 | = | $1,440 | + | $1,700 | - | $300 | + | $200 | - | $60 |
| $2,980 | $2980 | ||||||||||||||
The accounting equation is the basic tool of accounting, which measures the entity's resources. As per the accounting equation, assets are equal to the sum of liabilities and equity.
Transaction on May 1 will increase the cash under the asset and common stock under equity by $1,700.
Transaction on May 3 will increase the equipment under the asset and accounts payable under liabilities by $1,440.
Transaction on May 5 will increase accounts receivable under asset and service revenue under equity.
Transaction on May 17 will decrease cash under the asset and retained earnings under equity by $60.
Transaction on May 28 will decrease cash under the asset and retained earnings under equity by $300.