Exercise 3

I. Exercise 3-1 Types of Events, p. 129

1. External Transaction

2. External Transaction

3. Not Recorded

4. External Transaction

5. Internal Transaction

6. External Transaction

7. External Transaction

8. External Transaction

II.

Hint: Ask yourself with each of these transactions: "Is anyone else involved?" If so, it is external; if not, it is internal. If no accounting entry would be made at the time of the transaction, then it would not be recorded into the accounting system.

II. Exercise 3-3 The Effect of Transactions on the Accounting Equation, p. 129

1. No Effect

2. Increase

3. Increase

4. Decrease

5. No Effect

6. Increase

7. Decrease

8. Decrease

9. Increase

Hint: Be sure to determine after each item whether the equation would be in balance. Remember in some transactions, one asset is exchanged for another.

III. Problem 3-2 Transaction Analysis and Financial Statements, p. 134

Assets = | Liabilities | Stockholders’ Equity |

Date | Cash | Accounts Receivable | Equipment | Accounts Payable | Notes Payable | Capitol Stock | Retained Earnings |

May 1 | $18,000 | | | | | $18,000 | |

May 1 | ______ | | $3,000____ | $3,000_ | | ______ | |

Bal. | $18,000 | | $3,000 | $3,000 | | $18,000 | |

May 5 | -$15 | | _________ | _______ | | ______ | $-15____ |

Bal. | $17,085 | | $3,000 | $3,000 | | $18,000 | $-15 |

May 9 | -$4,400 | | $4,400 | _______ | | ______ | -$4,400_ |

Bal. | $13,585 | | $7,400 | $3,000 | | $18,000 | -$4,415 |

May 10 | ______ | | _________ | $100___ | | ______ | ________ |

Bal | $13,585 | | $7,400 | $3,100 | | $18,000 | -$4,415 |

May 15 | -$125_ | | _________ | _______ | | ______ | $-125___ |

Bal | $13,460 | | $7,400 | $3,100 | | $18,000 | $-4,540 |

May 17 | $1,800_ | | _________ | _______ | | ______ | $1,800__ |

Bal | $15,260 | | $7,400 | $3,100 | | $18,000 | -$2,740...