Shanna Engel started up a new nonprofit organization in 2013 named Concern for Animal Shelter and Habitats (CASH). The organizat
ion places homeless animals in permanent homes. Transactions during the first month of operations were as follows:
1. Borrowed $ 50,000 from a local bank. No interest is due on the loan during the first month, and the principal does not have to be paid back for two years.
2. Signed a contract with a local carpenter to build a fence to enclose the backyard. The carpenter charges $ 250 per hour and expects the fence to take 10 hours to complete. He expects to begin work next month.
3. CASH bought 50 bags of dog food and 25 bags of cat food. Dog food costs $ 20 per bag, while cat food costs $ 30 per bag. The pet food was bought on credit (i. e., CASH has not yet paid for the supplies).
4. CASH bought a sign to hang in front of its building. The sign cost $ 5,000 and CASH paid for it when it was received.
5. Purchased and received an office computer, server, printer, and copier. The total cost of the equipment was $ 10,000, half of which was paid and the other half was still owed.
Show the impact of these transactions on the fundamental equation of accounting.
1. Borrowed $ 50,000 from a local bank. No interest is due on the loan during the first month, and the principal does not have to be paid back for two years.
2. Signed a contract with a local carpenter to build a fence to enclose the backyard. The carpenter charges $ 250 per hour and expects the fence to take 10 hours to complete. He expects to begin work next month.
3. CASH bought 50 bags of dog food and 25 bags of cat food. Dog food costs $ 20 per bag, while cat food costs $ 30 per bag. The pet food was bought on credit (i. e., CASH has not yet paid for the supplies).
4. CASH bought a sign to hang in front of its building. The sign cost $ 5,000 and CASH paid for it when it was received.
5. Purchased and received an office computer, server, printer, and copier. The total cost of the equipment was $ 10,000, half of which was paid and the other half was still owed.
Show the impact of these transactions on the fundamental equation of accounting.
1 answer:
Answer:
Net Assets = Total Liabilities - Total Assets
Transaction # 1
Cash comes under Permanantly Restricted Net Assets
Hence -
Net Assets = $50,000 - $50,000 = $0
Transaction # 2
As there was no transaction took place hence nothing to be reported.
Transaction # 3
Inventory comes under supply & its temporarily restricted net assets
Hence
Net Assets = $1750 - $1750 = $0
Transaction # 4
Advertising comes under Permanently Restricted Net Assets
Hence
Net Assets = $0 - (-$5000) = $0 + $5000 = $5000
Transaction # 5
Office Equipments comes under Temporarily Restricted Net Assets
Hence
Net Assets = Total Liabilites - Total Assets
= $ 5000 - [ - $5000 + $10000 ]
= $ 5000 - $5000 = $0
Hence ending balance is
Unrestricted Net Asstes = $0
Temporarily Restricted Net Asstes = $0
Permanently Restrcited Net Asstes = $5000
Explanation:
See attached file for table
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