Question

Interstate Delivery Service is owned and operated by Katie Wyer. The following selected transaction were completed by Interstate Delivery Service during May:

1. Received cash from owner as additional investment, $18,000.

2. Paid advertising expense, $ 4,850.

3. Purchased supplies on account, $2,100.

4. Billed customers for delivery services on account, $14,700.

5. Received cash from customer on account, $8,200.

Indicate the effect of each transaction on the accounting equation elements ( Assets, Liabilities, Owner’s Equity, Drawing, Revenue, and Expense). Also indicate the specific item with the accounting equation element that is affected. To illustrate, the answer to (1) follows:

(1) Asset (Cash) increase by $18,000; Owner’s Equity (Katie Wyer, Capital) increase by $18,000.

Answer 1

Element	Direction	Item	Account Title
1. Received cash from owner as an additional investment $18,000	Asset	Increase by 18000	Cash
Owner's equity	Increase by 18000	Katie Wyer, Capital
2. Paid advertising expense $4,850	Owner's equity	Decrease by 4850	Retained Earnings (advertising expense)
Asset	Decrease by 4850	Cash
3. Purchased supplies on account $2,100	Asset	Increase by 2100	Supplies
Liability	Increase by 2100	Account Payables
4. Billed customers for delivery services on account $14,700	Asset	Increase by 14700	Accounts receivable
Owner's equity	Increase by 14700	Retained Earnings (Service Revenue)
5. Received cash from customers on account $8,200	Asset	Increase by 8200	Cash
Asset	Decrease by 8200	Accounts receivable

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