Question

The following events took place in January 2018. Sports Equipment Rentals (SER) rents equipment on an hourly or daily basis to customers. SER prepares monthly financial statements. Match each event with the choice that correctly describes the effect of the transaction on the accounting equation. Increase/decrease means one asset account increases and another decreases by the same amount. Use this selection for the next eight questions: Assets Liabilities EquityA. Increase No effect Increase B. Increase Increase No effectC. No effect Decrease IncreaseD. Increase/Decrease No effect No effectE. No TransactionJanuary 3: SER purchases $2,000 of sports equipment on credit. January 8: Customers pay SER $8,500 for daily rentals for services provided over the past three days. January 16: SER receives $4,000 for a 2-week rental for equipment for several teams. The rental period begins on February 10, 2014. January 17: SER signs an agreement to provide $4,500 of equipment to a customer in early February. The customer has not yet made a payment. January 25: SER receives $3,000 for services provided and billed in the prior month. January 30: SER rents out skates for a party that day and bills the customer for $300.January 30: SER completes a contract by providing rental equipment to a private school from January 17-30. The school paid $500 for the rental in December 2000. January 31: SER receives $120 in interest on a note receivable. (SER loaned an employee $10, 000 last November and the employee is paying SER monthly interest. The employee will repay the $10, 000 principal after one year.)

Answer 1

Payment received from Debtor: it'll increase Assets by $3,000 and reduce another asset by $3,000.Therefore, Il won't affect the financial position of SER. it's just a substitution of 1 sort of asset into another

Step-by-step explanation:

Accounting Equation: Assets = Equity + Liability

All the business transaction affects the equation supported double accounting concept. The above transaction will affect the equation in the following manner.

Credit purchase of equipment: it'll increase Assets by $2,000 and Liability also by $2,000.

Daily rental received by SER: it'll increase Assets by $8,500 and Equity by $8,500. Daily rental is that the income of SER so it'll increase profitability and equity.

Rent received for Feb month: it'll increase Assets by $4,000 and Liability by $4,000. Advance rent is going to be treated as a liability until the proper receive the rent being established.

it'll not affect the equation because merely signing an agreement with no payment for the services won't end in any assets or liability.

Payment received from Debtor: it'll increase Assets by $3,000 and reduce another asset by $3,000.Therefore, Il won't affect the financial position of SER. it's just a substitution of 1 sort of asset into another