Question

Amazon.com, Inc., headquartered in Seattle, WA, started its electronic commerce business in 1995 and expanded rapidly. The following transactions occurred during a recent year (dollars in millions):
Issued stock for $6 cash.
Purchased equipment costing $6,320, paying $4,893 in cash and charging the rest on account.
Paid $513 in principal and $91 in interest expense on long-term debt.
Earned $88,988 in sales revenue; collected $87,949 in cash with the customers owing the rest on account.
Incurred $10,766 in shipping expenses, all on credit.
Paid $28,241 cash on accounts owed to suppliers.
Incurred $4,332 in marketing expenses; paid cash.
Collected $620 in cash from customers paying on account.
Borrowed $6,359 in cash as long-term debt.
Used inventory costing $62,752 when sold to customers. Paid $177 in income tax recorded as an expense in the prior year.
For each of the transactions, indicate the effects (positive value for increase, negative value for decrease, and leave blank if no effect) on Income Statement and Balance Sheet.

Answer 1

Answer:

Please see below

Explanation:

1. Issue stock for $6 cash.

•Assets increase by $6

•Stockholder's equity increase by $6

2. Purchase equipment costing $6,320, paying $4,893 in cash and charging the rest on account

•Asset will increase by $6,320 (equipment)

•Assets decrease by $4,893 (cash)

•Hence net assets increase by $1,427

•Liabilities increase by $1,427 I.e The amount that was paid on account.

3. Paid $513 in principal and $91 in interest expense on long term debt

•Liabilities decrease by $604

4. Earned $88,988 in sales revenue;

Collected $87,949 in cash with the customers owing the rest on account

• Revenue increase by $88,988

• Assets increase by $87,949

5. Incurred $10,766 in shipping expenses, all on credit

• Expenses increases by $10,766

• Liabilities increases by $10,766

6. Paid $28,241 cash on accounts owned to suppliers

• Assets decrease by $28,241

• Liabilities decrease by $28,241

7. Incurred $4,332 in marketing expenses; paid cash

• Expenses increase by $4,332

• Assets decrease by $4,332

8. Collected $620 in cash from customers paying on account.

• Assets increase by $620

9. Borrowed $6,359 in cash as long term debt

• Assets increase by $6,359

• Liabilities increase by $6,359

10. Used inventory costing $62,752 when sold to customers

• Assets decrease by $62,752

11. Paid $177 in once tax recorded as an expense in the prior year

• liabilities decrease by $177