Question

The following selected events were experienced by either Smith Eldercare Services, Inc., a corporation, or Tony Smith, its major stockholder. Requirement:State whether each eventâ (1) increased,â (2) decreased, orâ (3) had no effect on the total assets of the business. Identify any specific asset affected. If noâ effect, indicate the reason. Account affected or Transaction Asset effect why assets are not affected A. Paid $400 cash on accounts payable B. Made a cash purchase of land for a building site for the business, $89,000. C. Sold land and received cash of $69,000 (the land was carried on the company's books at $69,000) D. Received $15,400 cash from customers on account. E. Purchased medical equipment and signed a $90,000 promissory note in payment

Answer 1

A. Paid $400 cash on accounts payable

Assets Effect :- Decrease in Total assets of the business

Assets Effect and Reason for no effect :- Cash decrease by $400.

B. Made a cash purchase of land for a building site for the business, $89,000

Assets Effect :- No effect in Total assets of the business

Assets Effect and Reason for no effect :- As land purchase for cash, cash decrease and land increase with the same amount.

C. Sold land and received cash of $69,000 (the land was carried on the company's books at $69,000)

Assets Effect :- No effect in Total assets of the business

Assets Effect and Reason for no effect :- The land was sold, so land decrease and cash increase with the same amount

D. Received $15,400 cash from customers on account

Assets Effect :- No effect in Total assets of the business

Assets Effect and Reason for no effect :- Cash increases and Accounts receivable decreases for the same amount

E. Purchased medical equipment and signed a $90,000 promissory note in payment

Assets Effect :- Increase in Total assets of the business

Assets Effect and Reason for no effect :- Equipment Increase