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4 November, 19:32

A number of business transactions carried out by Smalling Manufacturing Company are as follows.

a. Borrowed money from a bank.

b. Sold land for cash at a price equal to its cost.

c. Paid a liability.

d. Returned for credit some of the office equipment previously purchased on credit but not yet paid for. (Treat this the opposite of a transaction in which you purchased office equipment on credit.)

e. Sold land for cash at a price in excess of cost. (Hint: The difference between cost and sales price represents a gain that will be in the company's income statement.)

f. Purchased a computer on credit.

g. The owner invested cash in the business.

h. Purchased office equipment for cash.

i. Collected an account receivable.

Required:

1. Indicate the effects of each of these transactions on the total amounts of the company's assets, liabilities, and owner's equity.

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Answers (1)
  1. 4 November, 21:11
    0
    Answer and Explanation:

    The indications of the effect of each of following transactions are as follows

    Particulars Assets Liabilities Stockholder equity

    a. Borrowed

    money from bank Increase Decrease No effect

    b. Sold land for Cash increase No effect No effect

    cash at Land decrease

    a price equal

    to its cost

    c. Paid a liability Decrease Decrease No effect

    d. Returned for credit Decrease Decrease No effect

    some of the office

    equipment previously

    purchased on credit

    but not yet paid for

    e. Sold land for cash at Cash increase No effect Increase as Gain

    a price in excess of cost Land decrease

    f. Purchased a computer Increase Increase No effect

    on credit

    g. The owner invested

    cash in the business Increase No effect Increase

    h. Purchased office Increase in office No effect No effect

    equipment for cash Decrease in cash

    g. Collected an Increase in cash No effect No effect

    account receivable Decrease in account

    receivable
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