Question

The following transactions occur for Badger Biking Company during the month of June: a. Provide services to customers on account for $32,000. b. Receive cash of $24,000 from customers in (a) above. c. Purchase bike equipment by signing a note with the bank for $17,000. d. Pay utilities of $3,200 for the current month. Analyze each transaction and indicate the amount of increases and decreases in the accounting equation. (Decreases to account classifications should be entered as a negative.)

Answer 1

The Accounting Equation is: Assets = Liabilities + Stockholders' Equity. Thus, we will see how each transaction affects liabilities, assets, or, stockholders' equity.

a. Provide services to customers on account for $32,000.

Service revenue: $32,000 to stockholders equity.

Accounts receivable: $32,000 to assets.

b. Receive cash of $24,000 from customers in (a) above.

Cash: $24,000 to assets.

Accounts Receivable: ($24,000) to assets.

c. Purchase bike equipment by signing a note with the bank for $17,000.

Equipment: $17,000 to assets.

Accounts payable: $17,000 to liabilities.

d. Pay utilities of $3,200 for the current month.

Uitlities expense: ($3,200) to stockholders equity.

Cash: ($3,200) to assets.