Final answer:
Candy Co.'s borrowing of $50,000 increases both assets and liabilities by the same amount, maintaining the balance in the accounting equation. Similarly, a bank loan increases the bank's assets and affects the money supply as the loaned funds are deposited and become available for further lending.
Step-by-step explanation:
When Candy Co. borrowed $50,000 from the bank on November 1, 2018, the transaction affected the accounting equation by increasing both its assets and liabilities. Specifically, Candy Co. would record the cash received as an increase in assets, and the note payable to the bank as an increase in liabilities. The accounting equation, which states that Assets = Liabilities + Shareholders' Equity, remains in balance because the $50,000 increase in assets is offset by a $50,000 increase in liabilities.
Similarly, when Singleton Bank lends money, for example, $9 million to Hank's Auto Supply, it records the loan as an asset because it will generate interest income. This is reflected on the bank's balance sheet, impacting its reserves and the overall money supply in the banking system as deposits at First National increase, thereby boosting their reserves as well. First National is then able to loan out a majority of these deposits, further influencing the money supply.