Question

the following transactions occur for the hamilton manufacturers. (a) provide services to customers on account for $4,800. (b) purchase equipment by signing a note with the bank for $10,100. (c) pay advertising of $1,300 for the current month. analyze each transaction and indicate the amount of increases and decreases in the accounting equation. note: decreases to account classifications should be entered as negative amounts.

Explanation:

Step1: Analyze transaction (a)

Providing services on account increases accounts receivable (an asset) by $4,800 and increases revenue, which in turn increases stockholders' equity by $4,800. There is no impact on liabilities.

Transaction	Assets	=	Liabilities	+	Stockholders' Equity

Step2: Analyze transaction (b)

Purchasing equipment by signing a note increases equipment (an asset) by $10,100 and also increases notes payable (a liability) by $10,100. There is no impact on stockholders' equity.

Transaction	Assets	=	Liabilities	+	Stockholders' Equity

Step3: Analyze transaction (c)

Paying for advertising decreases cash (an asset) by $1,300 and also decreases retained earnings (part of stockholders' equity) by $1,300 as it is an expense. There is no impact on liabilities.

Transaction	Assets	=	Liabilities	+	Stockholders' Equity

Answer:

Transaction	Assets	=	Liabilities	+	Stockholders' Equity
(b)	$10,100	=	$10,100	+	0
(c)	-$1,300	=	0	+	-$1,300