Question

Casting crown construction entered into the following transactions during a recent year:

january 2 purchased a bulldozer for $200,000 by paying $20,000 cash and signing a $180,000 note.
january 3 replaced the steel tracks on the bulldozer at a cost of $20,000, purchased on account.
january 30 wrote a cheque for the amount owed on account for the work completed on january 3.
february 1 replaced the seat on the bulldozer and wrote a cheque for the full $600 cost.
march 1 paid $2,400 cash for the rights to use computer software for a two-year period.
required: analyze the accounting equation effects. (enter any decreases to accounts with a minus sign.)

Answer 1

In analyzing the accounting equation effects of the transactions, we observe the changes in assets, liabilities, and owner's equity. The transactions involve purchasing assets, making payments, and incurring liabilities. Each transaction impacts the accounting equation in specific ways.

Step-by-step explanation:

The given question provides a series of transactions conducted by Casting Crown Construction. In order to analyze the effect on the accounting equation, we need to understand the basic accounting equation. The accounting equation states that Assets = Liabilities + Owner's Equity. Let's analyze each transaction:

1. January 2: The company purchased a bulldozer for $200,000 by paying $20,000 in cash and signing a $180,000 note. The effect on the accounting equation is as follows:
2. January 3: The company replaced the steel tracks on the bulldozer for $20,000, purchased on account. The effect on the accounting equation is as follows:
3. January 30: The company wrote a cheque for the amount owed on account for the work completed on January 3. The effect on the accounting equation is as follows:
4. February 1: The company replaced the seat on the bulldozer and wrote a cheque for the full $600 cost. The effect on the accounting equation is as follows:
5. March 1: The company paid $2,400 cash for the rights to use computer software for a two-year period. The effect on the accounting equation is as follows:

Overall, each transaction has an effect on the accounting equation by either increasing or decreasing specific accounts within the equation. It is important for businesses to track these transactions to ensure accurate financial reporting.