6. Paid balance owing on lawn mower. 7. Incurred telephone expenses of $85 on account. 8. Completed services for customers who pay $440 cash. 9. William Givens, the owner, invests $7,000 of additional funds in the business. 10. Part of the funds invested is used to repay the full balance of the bank loan plus $65 in interest expense. 11. $1,250 in wages is paid to employees. 12. William withdrew $1,000 cash for personal use. Instructions For each transaction, state whether the transaction increases or decreases assets, liabilities and/or equity, and by what amount(s). owner’s Solution Exercise 32 (10 min) 1. Increases assets and liabilities by $1,800 each. 2. No effect increase and decrease in assets offset. – 3. Assets and equity are each increased by $1,500. owner’s 4. Assets and liabilities each increase by $6,500. 5. No effect increase and decrease in assets offset. – 6. Assets and liabilities are each decreased by $1,800. 7. Liabilities are increased by $85 and equity decreased by the same amount. owner’s 8. Assets and equity are each increased by $440. owner’s 9. Assets and equity are each increased by $7,000. owner’s 10. Assets are decreased by $6,565, liabilities decreased by $6,500 and equity decreased owner’s by $65. 11. Assets and equity are each decreased by $1,250. owner’s 12. Assets and equity are each decreased by $1,000. owner’s Exercise 33 A service proprietorship shows five transactions summarized below. The effect of each transaction on the accounting equation is shown. Accounts Equip- Accounts Cash + Rec. + ment + Land + Capital Drawings + Revenues Expenses – – $5,000 $6,500 $10,000 $7,500 $50,000 $3,000 $66,000 $20,000 $35,000 $5,000 1. -2,000 –2,000 2. +1,000 –1,000 3. +5,000 +5,000 4. +2,500 +2,500 5. +3,000 +3,000
6. Paid balance owing on lawn mower. 7. Incurred telephone expenses of $85 on account. 8. Completed services for customers who pay $440 cash. 9. William Givens, the owner, invests $7,000 of additional funds in the business. 10. Part of the funds invested is used to repay the full balance of the bank loan plus $65 in interest expense. 11. $1,250 in wages is paid to employees. 12. William withdrew $1,000 cash for personal use. Instructions For each transaction, state whether the transaction increases or decreases assets, liabilities and/or owner’s equity, and by what amount(s). Solution Exercise 32 (10 min) 1. Increases assets and liabilities by $1,800 each. 2. No effect – increase and decrease in assets offset. 3. Assets and owner’s equity are each increased by $1,500. 4. Assets and liabilities each increase by $6,500. 5. No effect – increase and decrease in assets offset. 6. Assets and liabilities are each decreased by $1,800. 7. Liabilities are increased by $85 and owner’s equity decreased by the same amount. 8. Assets and owner’s equity are each increased by $440. 9. Assets and owner’s equity are each increased by $7,000. 10. Assets are decreased by $6,565, liabilities decreased by $6,500 and owner’s equity decreased by $65. 11. Assets and owner’s equity are each decreased by $1,250. 12. Assets and owner’s equity are each decreased by $1,000. Exercise 33 A service proprietorship shows five transactions summarized below. The effect of each transaction on the accounting equation is shown. Accounts Equip- Accounts Cash + Rec. + ment + Land + Capital – Drawings + Revenues – Expenses $5,000 $6,500 $10,000 $7,500 $50,000 $3,000 $66,000 $20,000 $35,000 $5,000 1. –2,000 -2,000 2. +1,000 –1,000 3. +5,000 +5,000 4. +2,500 +2,500 5. +3,000 +3,000