Question

The following transactions occur for Badger Biking Company during the month of June: Provide services to customers on account for $35,000. Receive cash of $27,000 from customers in (a) above. Purchase bike equipment by signing a note with the bank for $20,000. Pay utilities of $3,500 for the current month. Analyze each transaction and indicate the amount of increases and decreases in the accounting equation

Answer 1

Answer:

Assets   =   Liabilities   +   Equity

1) services on account

+35,000 (A/R)              + 35,000 Service revenue

2) collection of 27,000

-27,000 (A/R)

+27,000 (cash)

net effect of zero

3) acquisition of equipment through promissory note

+20,000 (equipment +20,000(note payable)

4) -3,500(cash)                    - 3,500 utlities expense

Explanation:

Asset will be affected when cash, equivalent of cash, or right or property than can be used to produce cashflow is acquired or used

Liabilities is affected whe nwe take debt like in #3

Equity when the company generated revenue or expenses.

It will also be affected when investment fro mowners are made.