1. Analyze the effect of each transaction on the accounting equation. For example, if salaries of $500 were paid, the answer would be "Decrease in stockholders' equity (expense) $500 and decrease in assets (cash) $500."

   a. Performed consulting services for a client in exchange for $3,200 cash. Increase assets (cash)

   • Increase assets (cash)
   • Decrease assets (cash)
   • Decrease stockholders' equity (revenue)
   $3,200 and
   • increase stockholders' equity (revenue)
   • decrease assets (cash)
   • decrease stockholders' equity (revenue)
   $3,200.

   b. Performed consulting services for a client on account, $1,700.

   • Increase assets (accounts receivable)
   • Increase assets (cash)
   • Decrease stockholders' equity (revenue)
   $1,700 and
   • increase stockholders' equity (revenue)
   • decrease assets (accounts receivable)
   • decrease stockholders' equity (revenue)
   $1,700.

   c. Paid $30,000 cash for land.

   • Increase assets (land)
   • Decrease stockholders' equity (expense)
   • Decrease assets (land)
   $30,000 and
   • decrease stockholders' equity (expense)
   • decrease assets (cash)
   • increase liabilities (notes payable)
   $30,000.

   d. Purchased office supplies on account, $900.

   • Increase assets (supplies)
   • Decrease assets (supplies)
   • Decrease liabilities (accounts payable)
   $900 and
   • increase liabilities (accounts payable)
   • decrease assets (supplies)
   • decrease liabilities (accounts payable)
   $900.

   e. Paid a $2,500 cash dividend to stockholders.

   • Increase assets (cash)
   • Increase stockholders' equity (dividend)
   • Decrease assets (cash)
   $2,500 and
   • increase assets (cash)
   • increase stockholders' equity (dividend)
   • decrease stockholders' equity (dividend)
   $2,500.

   f. Paid $550 on account for supplies purchased in Transaction d.

   • Increase assets (cash)
   • Increase liabilities (accounts payable)
   • Decrease assets (cash)
   $550 and
   • increase assets (cash)
   • increase liabilities (accounts payable)
   • decrease liabilities (accounts payable)
   $550.

   g. Paid $800 cash for the current month's rent.

   • Increase assets (cash)
   • Decrease stockholders' equity (expense)
   • Increase liability (payable)
   $800 and
   • increase assets (cash)
   • decrease assets (cash)
   • decrease assets (cash)
   $800.

   h. Collected $1,500 from client in Transaction b.

   • Increase assets (cash)
   • Increase assets (accounts receivable)
   • Decrease assets (cash)
   $1,500 and
   • increase assets (accounts receivable)
   • decrease assets (cash)
   • decrease assets (accounts receivable)
   $1,500.

   i. Stockholders invested $20,000 cash in the business.

   • Increase assets (cash)
   • Decrease assets (cash)
   • Decrease stockholders' equity (common stock)
   $20,000 and
   • increase stockholders' equity (common stock)
   • decrease assets (cash)
   • decrease stockholders' equity (common stock)
   $20,000.

   2. Conceptual Connection: For Event d, what accounting principle did you use to determine the amount to be recorded for supplies?

   • Conservatism principle
   • Expense recognition principle
   • Historical cost principle

   2)

   Kauai Adventures rents and sells surfboards, snorkeling, and scuba equipment. During March, Kauai engaged in the following transactions:

   March Transactions:
   Mar.	2	Received $51,500 cash from customers for rental.
   	3	Purchased on credit ten new surfboards (which Kauai classifies as inventory) for $180 each.
   	6	Paid wages to employees in the amount of $9,200.
   	9	Paid office rent for the month in the amount of $1,000.
   	12	Purchased a new Ford truck for $40,800; paid $1,000 down in cash and secured a loan from Princeville Bank for the $39,800 balance.
   	13	Collected a $1,050 account receivable.
   	16	Paid an account payable in the amount of $950.
   	23	Borrowed $10,000 on a 6-month, 8% note payable.
   	27	Paid the monthly telephone bill of $185.
   	30	Paid a monthly advertising bill of $1,550.

   Required:

   Prepare a journal entry for each of these transactions.

   CHART OF ACCOUNTS

   Kauai Adventures

   General Ledger

   	ASSETS
   111	Cash
   121	Accounts Receivable
   122	Notes Receivable
   123	Supplies
   124	Prepaid Insurance
   125	Prepaid Rent
   126	Inventory
   131	Land
   132	Buildings
   133	Equipment
   134	Furniture
   135	Trucks
   139	Accumulated Depreciation

   	LIABILITIES
   211	Accounts Payable
   212	Notes Payable
   213	Income Taxes Payable
   214	Wages Payable
   215	Utilities Payable
   216	Insurance Payable
   217	Interest Payable
   218	Rent Payable
   219	Unearned Service Revenue
   231	Bonds Payable

   	EQUITY
   311	Common Stock
   321	Retained Earnings
   331	Dividends

   	REVENUE
   411	Sales Revenue
   412	Service Revenue
   413	Interest Income

   	EXPENSES
   511	Cost of Goods Sold
   512	Advertising Expense
   513	Supplies Expense
   514	Utilities Expense
   515	Rent Expense
   516	Insurance Expense
   517	Repairs and Maintenance Expense
   521	Wages Expense
   531	Interest Expense
   532	Depreciation Expense
   533	Income Taxes Expense