ANSWERS TO QUESTIONS
3.
Accounting transactions are the economic events of the company recorded by accountants
because they affect the basic accounting equation.
(a) The death of a major stockholder of the company is not an accounting transaction as it
does not affect the basic accounting equation.
(b) Supplies purchased on account is an accounting transaction because it affects the
basic accounting equation.
(c) An employee being fired is not an accounting transaction as it does not affect the
basic accounting equation.
(d) Paying a cash dividend to stockholders is an accounting transaction as it does affect
the basic accounting equation.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 3-2
Cash
(1)
+$60,000
(2)
–9,000
(3)
+13,000
(4)
Assets
=
Liabilities
+ Stockholders’ Equity
Accounts
Accounts
Bonds
Common
Retained
+ Receivable + Supplies = Payable + Payable + Stock + Earnings
+$60,000
–$9,000
–$13,000
+$3,100
+$3,100
Paid div.
Assets
=
Liabilities
+
Stockholders’ Equity
EXERCISE 3-3
SOLUTIONS TO
EXERCISES
Cash
(1)
+$100,000
(2)
+45,000
(3)
–60,000
(4)
+16,000
Accounts
+ Receivable + Supplies +
(9)
Accounts
Payable +
Bonds
Payable
+
Common
Stock
Retained Earnings
+ Revenues – Expenses – Dividends
Issued Stock
+$45,000
+$60,000
+$16,000
+$4,700
Service Revenue
+$4,700
–5,200
(7)
(8)
=
+$100,000
(5)
(6)
Equipment
–$5,200
+$10,000
Rent Expense
+10,000
–28,000
Service Revenue
–28,000
Salaries and
Wages Expense
–11,000
$ 56,800 +
–$11,000
$10,000
+
$4,700
$131,500
+
$60,000
$4,700
+
$45,000 +
$100,000 +
+$26,000 –
$131,500
$33,200
–
$11,000
Dividends