AP Brady Company entered into these transactions during May 2025, its first month of operations.

1. Stockholders invested \(\$ 40,000\) in the business in exchange for common stock of the company.

2. Purchased computers for office use for \(\$ 30,000\) from Ladd on account.

3. Paid \(\$ 4,000\) cash for May rent on storage space.

4. Performed computer services worth \(\$ 19,000\) on account.

5. Performed computer services for Wharton Construction Company for \(\$ 5,000\) cash.

6. Paid Western States Power Co. \(\$ 8,000\) cash for energy usage in May.

7. Paid Ladd for the computers purchased in (2).

8. Incurred advertising expense for May of \(\$ 1,300\) on account.

9. Received \(\$ 12,000\) cash from customers for contracts billed in (4).

Instructions

Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to revenues or expenses in the right-hand margin. Use Illustration 3.4 as a model.

Determine effect of transactions on basic accounting equation.

Illustration 3.4

Transcribed Image Text:

Cash Assets Accounts. + Receivable + Equipment = = Liabilities + Accounts Payable Stockholders' Equity Retained Earnings Common + Stock + Revenues Expenses Dividends