Question

Evaluate each of the following transactions in terms of their effect on assets, liabilities, and equity. 1. Borrow $55,000 from a bank 2. Buy $14,000 worth of manufacturing supplies on credit 3. Pay $7,000 owed to a supplier 4. Receive payment of $12,000 owed by a customer What is the net change in Total Assets?

Answer 1

Transactions
1. Borrow $55,000 from a bank
Asset:	It increased the cash balance, so assets increased by $ 55000
Liabilities:	It increased the loan, so liabilities got increased by $ 55000
Equity:	It has no effect on equity
2. Buy $14,000 worth of manufacturing supplies on credit
Asset:	Supplies are a part of current assets, so assets increased by $ 14000
Liabilities:	The supplies are bought on credit, so liability arised for the company of $ 14000
Equity:	It has no effect on equity
3. Pay $7,000 owed to a supplier
Asset:	Cash has been paid to clear the dues, so assets got decreased by $ 7000
Liabilities:	Company cleared its due amount by paying it off, so liabilities got decreased by $ 7000
Equity:	It has no effect on equity
4. Receive payment of $12,000 owed by a customer
Asset:	Payment received, so cash balance increased by $ 12000
	And, accounts receivable got decreased by $ 12000.
	Therefore, there is no net effect on total assets by this transaction
Liabilities:	It has no effect on liabilities
Equity:	It has no effect on equity

Net Change in Total Assets
Transactions			Amounts
1)	Increase		$ 55,000.00
2)	Increase		$ 14,000.00
3)	Decrease		$ (7,000.00)
4)	No effect		$               -
			$ 62,000.00