BE3.1 (LO 1) Presented below are a number of transactions. (a) Indicate whether each transaction increased...

BE3.1 (LO 1) Presented below are a number of transactions. (a) Indicate whether each transaction increased (+), decreased (–), or had no effect (NE) on assets, liabilities, and shareholders’ equity. (b) Which of the following are accounting transactions that should be recorded in the accounting records?

(1)Purchased equipment for cash. Completed the paperwork to hire a new employee;

(2) the employee will start work next week. Fired the CEO.

(3)Performed services on account.

(4)A potential customer called to inquire about the availability of a product with limited availability and you are sure they will call back to place an order within the week.

Analyze effects of transactions.

Hello, I am wondering how to answer 4 questions mentioned above. Especially regarding to question (1) , why the assets have to be (+) and (-) ?

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Expert Solution

Presented below are a number of transactions. (a) Indicate whether each transaction increased (+), decreased (–), or had no eff ect (NE) on assets, liabilities, and shareholders’ equity. (b) Which of the following are accounting transactions that should be recorded in the accounting records?

1. Purchased equipment for cash.

2. Completed the paperwork to hire a new employee; the employee will start work next week.

3. Fired the CEO.

4. Performed services on account.

5. A potential customer called to inquire about the availability of a product with limited availability and you are sure they will call back to place an order within the week.

Answer:-

(a)

Total Assets = Total Liabilities + Total Shareholders’ Equity

1. (+) (-) NE NE

2. NE NE NE

3. NE NE NE

4. (+) NE (+)

5. NE NE NE

(b) Items 1 and 4 are accounting transactions that should be recorded in the accounting records. Each of these transactions have an impact on the accounting equation as shown in part (a).

Items 2, 3, and 5 should not be recorded in the accounting equation. They do not yet impact the accounting equation.

ekkarill92 answered 1 year ago

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