Question

Analyze the impact of business transactions on accounts) The following selected events were experienced by either Smith Eldercare Services, Inc., a corporation, or Tony Smith, its major stockholder. State whether each event (1) increased, (2) decreased, or (3) had no effect on the total assets of the business. Identify any specific asset affected.
a. Paid $400 cash on accounts payable.
b. Made a cash purchase of land for a building site for the business, $89,000.
c. Sold land and received cash of $69,000 (the land was carried on the company's books at $69,000).
d. Received $15,400 cash from customers on account.
e. Purchased medical equipment and signed a $90,000 promissory note in payment.
f. Purchased a flat-screen TV for Smith’s home.
g. Paid Smith a cash dividend of $4,000.
h. Purchased office supplies on account for $1,200.
i. Borrowed $62,000 from the bank for use in the business.
j. Received $12,000 cash and issued stock to a stockholder.

Answer 1

Answer:

Eldercare Services, Inc.

Analysis of the impact of business transactions on accounts:

Stating whether each event (1) increased, (2) decreased, or (3) had no effect on the total assets of the business:

a. Cash decreased by $400.

b. Cash decreased by $89,000 and Land increased by $89,000.

c. Cash increased by $69,000 and Land decreased by $69,000.

d. Cash increased by $15,400 and Accounts Receivable decreased by $15,400.

e. Equipment increased by $90,000.

f. Not a business transaction (no effect on the total assets of the business).

g. Cash decreased by $4,000.

h. Office Supplies increased by $1,200.

i. Cash increased by $62,000.

j. Cash increased by $12,000.

Explanation:

Eldercare Services, Inc.'s assets are impacted by the above transactions except transaction "f" which concerns the major stockholder, Tony Smith.  The impact has to do with either an increase or a decrease in the total assets.  The specific asset affected has been stated in each transaction with the corresponding amount involved.