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Indicate the effects of the following business transactions on the accounting equation for Sam's Snack Foods, a supplier of snack foods.
Transaction (a) is answered as a guide. a. Sam s Snack Foods received cash from the issuance of common stock to stockholders. Answer: Increase asset (Cash); Increase equity (Common Stock)
b. Cash purchase of land for a building site.
c. Paid cash on accounts payable.
d. Purchased equipment; signed a note payable.
e. Performed service for a customer on account.
f. Employees worked for the week but will be paid next Tuesday.
g. Received cash from a customer on accounts receivable.
h. Borrowed money from the bank.
i. Cash dividends paid to stockholders.
j. Incurred utilities expense on account.

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Answer:

a. Sam s Snack Foods received cash from the issuance of common stock to stockholders.

  • Increase asset (Cash); Increase equity (Common Stock)

b. Cash purchase of land for a building site.

  • Decrease current asset (Cash); Increase non-current asset (Land)

c. Paid cash on accounts payable.

  • Decrease asset (Cash); Decrease liabilities (Accounts payable)

d. Purchased equipment; signed a note payable.

  • Increase non-current asset (Equipment); Increase long term liabilities (Notes payable)

e. Performed service for a customer on account.

  • Increase asset (Accounts receivable); Increase equity (Retained earnings)

f. Employees worked for the week but will be paid next Tuesday.

  • Increase liabilities (Wages payable); Decrease equity (Retained earnings)

g. Received cash from a customer on accounts receivable.

  • Increase asset (Cash); Decrease asset (Accounts receivable)

h. Borrowed money from the bank.

  • Increase asset (Cash); Increase liability (Notes payable)

i. Cash dividends paid to stockholders.

  • Decrease asset (Cash); Decrease equity (Retained earnings)

j. Incurred utilities expense on account.

  • Increase liabilities (Accounts payable); Decrease equity (Retained earnings)

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