Question

Elain's Inflatables earns service revenue by providing party planning services and inflatable playscapes. Elaine?'s Inflatables is organized as a sole proprietorship and owned by Elaine Gibson. During the past? month, Elaine?'s Inflatables has the following? transactions:a. Gibson contributed $10,000 to the business in exchange for capital.
b. Purchased equipment for $5,000 on account.c. Paid $400 for office supplies.d. Earned and received $2,500 cash for service revenue.e. Paid $400 for wages to employees.f. Gibson withdrew $1,000 cash.g. Earned $1,000 for services provided. Customer has not yet paid.h. Paid $1,000 for rent.i. Received a bill for $250 for the monthly utilities. The bill has not yet been paid.QUESTION: Indicate the effects of the business transactions on the accounting equation for Elaine?'s Inflatables. Transaction? (a) is answered as a guide:a. Gibson contributed $10,000 to the business in exchange for capital.a. EXAMPLE: Increase asset (Cash) ; Increase equity (Gibson, Capital)b. Purchased equipment for $5,000 on account?b. Decrease asset? / Accounts Payable? / ; Decrease asset? / Accounts Payable?

Answer 1

Answer:

B. Purchased equipment for $5,000 on account?

Increased asset (plant, property, and equipment).

Increased liability (accounts payable)

C. Paid $400 for office supplies.

Increased asset (office supplies)

Decreased liability (cash)

D. Earned and received $2,500 cash for service revenue.

Increased asset (cash)

Increased revenue (service revenues)

E. Paid $400 for wages to employees.

Increased expense (wage expense)

Decreased asset (cash)

F. Gibson withdrew $1,000 cash.

Increased asset (cash)

Decreased asset (bank account)

G. Earned $1,000 for services provided. Customer has not yet paid

Increased asset (accounts receivable)

Increased revenue (accrued revenue)

H. Paid $1,000 for rent.

Increased expense (rent)

Decreased asset (cash)

I. Received a bill for $250 for the monthly utilities. The bill has not yet been paid.

Increased liability (accrued expense)

Increased expense (utilities)