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IDIC Question 5 Selected transactions for Front Room, an interior decorator corporation, in its first month of business, are as follows. 1. 2. 3. 4. 5. 6. 7. 8. Issued stock to investors for $17,000 in cash. Purchased used car for $10,000 cash for use in business. Purchased supplies on account for $340. Billed customers $4,620 for services performed. Paid $140 cash for advertising start of the business. Received $1,460 cash from customers billed in transaction (4). Paid creditor $370 cash on account. Paid dividends of $450 cash to stockholders. For each transaction indicate the basic type of account debited and credited (asset, liability, stockholders' equity); the specific account debited and credited (Cash, Rent Expense, Service Revenue, etc.); whether the specific account is increased or decreased; and the normal balance of the specific account. No. Basic Type Asset Account Debited Specific Account Effect Cash Increase Normal Balance Debit Basic Type Stockholders' Equity Account Credited Specific Account Effect Common Stock Increase Normal Balance Credit

Answer 1

31 Asset Account Debited Account Credited No. Basic type Specific account Effect Normal balance Basic type Specific account Effect Normal balance 1 Asset Cash Increase Debit Stockholders' equity common stock Increase Credit 2 Asset Equipment (or) Car Increase Debit Asset Cash Decrease Debit Supplies Increase Debit Liability Accounts payable Increase Credit 4 Asset Accounts receivable Increase Debit Stockholders' equity Service revenue Increase Credit 5 Stockholders' equity Advertising expense Increase Debit Asset Cash Decrease Debit 6 Asset Cash Increase Debit Asset Accounts receivable Decrease Debit 7 Liability Accounts payable Decrease Credit Asset Cash Decrease Debit 8 Stockholders' equity Dividends Increase Debit Asset Cash Decrease Debit

No.	Account titles and explanation	Debit	Credit
1	Cash	17,000
	Common stock		17,000
2	Equipment (or) Car	10,000
	Car		10,000
3	Supplies	340
	Accounts payable		340
4	Accounts receivable	4,620
	Service revenue		4,620
5	Advertising expense	140
	Cash		140
6	Cash	1,460
	Accounts receivable		1,460
7	Accounts payable	370
	Cash		370
8	Dividends	450
	Cash		450