Question

[BCG Dry Cleaners is owned and operated by Maria Rita. A building and equipment are currently being rented. The actual work of dry cleaning is done by another company at wholesale rates. The assets and the liabilities of the business on November 1, 2020 are as follows: Cash $34,200; Accounts Receivable $40,000; Supplies $5,000 ; Land $50,000; Accounts Payable $16,400. Business transactions during November are sumarized as follows:

a. Maria Rita invested additional cash in the busines with a deposit of $35,000 in the business account
b. Purchase land for use as parking lot, paying cash of $30,000
c. Paid rent for the month, $4,500

Answer 1

Maria Rita's additional cash investment increased cash reserves, buying a parking lot expanded the company's real estate assets, and paying rent decreased cash reserves, affecting the balance sheet.

Step-by-step explanation:

The student's question revolves around the interpretation of transitional business activities and their impact on a company's balance sheet. Specifically, they are looking for an understanding of how Business transactions such as additional capital investment, the purchase of land for business use, and rent payment affect the business's financial position. The reference information provided, which includes changes to Singleton Bank's balance sheet, is used to illustrate the concept of how a change in business operations can affect the assets, liabilities, and equity of a business.

After Maria Rita's investment of additional $35,000, the cash reserve increases, similarly purchasing land for $30,000 decreases the cash reserve but increases real estate assets. Paying rent impacts the cash reserve and represents an expense for the month, impacting the net income. These transactions change the balance sheet, which reflects the true financial status of the business after these operations.