Book 1 - Chapter 6

6-2.

	A = L + OE
Transaction	Step 1: Are assets affected?	Step 2: Are liabilities affected?	Step 3: Is owner’s equity affected?
a. The owner of Ellisville Enterprises invests $10,000 in his business.	$10,000	No	$10,000
b. Senatobia Company borrowed $5,000.	$5,000	$5,000	No
c. Youngstown Service Company earned $1,000 of revenue that had already been prepaid by a customer last month.	No $1,000 $1,000 (The liability decreases because the business provided services to the customer who had paid in advance, which is a liability (see page 126).
d. Canton Corporation used $5,000 of cash to purchase supplies.	$5,000 $5,000	No	No
e. Brownsville Company provided $2,500 of consulting services to a customer on credit.	$2,500	No	$2,500
f. Harlingen Partnership received a telephone bill and paid it at once.	$$$	No	$$$
g. Chula Vista Corporation used $2,500 of consulting services and did not pay for them immediately.	No	$2,500	$2,500
h. Redding Company purchased $10,000 of equip- ment by paying $2,000 cash and borrowing $8,000.	$10,000 $2,000	$8,000	No
i. Shasta Company collects $1,000 owed by a customer on account.	$1,000 $1,000	No	No

6-3.

a.	The business performed services for a customer from whom it had previously received an advance payment.
b.	The business paid a debt of some kind.
c.	The business used up assets as part of operations—an expense.
d.	The owner withdrew assets for personal use.
e.	Cash was used to purchase an asset; one asset was exchanged for a different asset; an account receivable was collected.
f.	A bill for services was received which was not immediately paid—an unpaid expense.
g.	The business performed services for customers and received cash or accounts receivable, or any other asset.
h.	The owner made an investment in the business.
i.	The business borrowed money or purchased assets on credit.
j.	If there was a transaction, it was one that had nothing to do with the business, so assets, liabilities, and owner’s equity were all unaffected.

Learning Goal 6, continued

SOLUTIONS

Section II · Transactions—Analyzing and Visualizing

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