Final answer:
The net changes in the transactions reflect how each one affects the company's assets, liabilities, and equity. Borrowing from a bank, buying on credit, and issuing stock increase total assets, while paying liabilities and making cash purchases decrease them. The final calculation shows a net increase in Total Assets of $93,000.
Step-by-step explanation:
To evaluate the effects of the transactions on assets, liabilities, and equity, it is helpful to consider each one separately:
- Borrow $55,000 from a bank increases assets (cash) and increases liabilities (loan) by $55,000.
- Buy $14,000 worth of manufacturing supplies on credit increases assets (supplies) and increases liabilities (accounts payable) by $14,000.
- Pay $7,000 owed to a supplier decreases assets (cash) and decreases liabilities (accounts payable) by $7,000.
- Receive payment of $12,000 owed by a customer increases assets (cash) and decreases assets (accounts receivable) by $12,000; no net change in assets overall.
- Issue $75,000 in stock increases assets (cash) and increases equity (stockholder's equity) by $75,000.
- Purchase equipment for $44,000 in cash decreases assets (cash) and increases assets (equipment) by $44,000; no net change in assets overall.
- Receive payment of $13,000 owed by a customer increases assets (cash) and decreases assets (accounts receivable) by $13,000; no net change in assets overall.
The net change in Total Assets is calculated by adding the increases and subtracting the decreases. The increases are $55,000 (borrowing), $14,000 (supplies on credit), and $75,000 (issuing stock). The decreases are $7,000 (payment to the supplier) and $44,000 (purchase of equipment). The net change is:
$55,000 + $14,000 + $75,000 - $7,000 - $44,000 = $93,000 net increase in Total Assets.