Question

The following transactions occur for Badger Biking Company during the month of June:

Provide services to customers on account for $31,000.
Receive cash of $23,000 from customers in (a) above.
Purchase bike equipment by signing a note with the bank for $16,000.
Pay utilities of $3,100 for the current month.
Analyze each transaction and indicate the amount of increases and decreases in the accounting equation.
Transaction Assets = Liabilities + Stockholder's Equity
a)
b)
c)
d)

Answer 1

Assets = Liabilities + Stockholders' equity

Accounts receivable $31,000(+) Revenue $31,000(+)

Cash $23000 (+)

Accounts receivable $23,000(-)

Bike equipment $16,000(+) notes payable $16,000(+)

Cash $3,100(-) retained earnings$3,100(-)

Step-by-step explanation:

The first transaction increases assets (accounts receivable) by $31000 while revenue (stockholders' equity) increased by the same amount

The cash receipt of $23,000 increases asset cash by $23,000 and decreases an asset, accounts receivable by the same amount.

The purchase of an asset by notes payable increases asset, bike equipment by $16,000, while liabilities(notes payable) also increases by $16,000

The payment of utilities for $3,100 decreases asset (cash) by $3,100 while stockholders equity (retained earnings) decreases by same amount.