Elaine's Inflatables earns service revenue by providing party planning services and inflatable playscapes. Elaine's Inflatables is organized as a sole proprietorship and owned by Elaine Gibson. During the past month, Elaine's Inflatables has the following transactions: A (Click the icon to view the transactions.) Indicate the effects of the business transactions on the accounting equation for Elaine's Inflatables. Transaction (a) is answered as a guide. Use the following accounts: Cash; Accounts Receivable; Supplies; Equipment; Accounts Payable; Gibson, Capital; Gibson, Withdrawals; Service Revenue, Wages Expense, Rent Expense, and Utilities Expense. a. Gibson contributed $10,000 to the business in exchange for capital. (Transaction (a) is answered as a guide.) a. Increase asset (Cash) Increase equity (Gibson, Capital) b. Purchased equipment for $5,000 on account. b.
Elaine's Inflatables earns service revenue by providing party planning services and inflatable playscapes. Elaine's Inflatables is organized as a sole proprietorship and owned by Elaine Gibson. During the past month, Elaine's Inflatables has the following transactions: A (Click the icon to view the transactions.) Indicate the effects of the business transactions on the accounting equation for Elaine's Inflatables. Transaction (a) is answered as a guide. Use the following accounts: Cash; Accounts Receivable; Supplies; Equipment; Accounts Payable; Gibson, Capital; Gibson, Withdrawals; Service Revenue, Wages Expense, Rent Expense, and Utilities Expense. a. Gibson contributed $10,000 to the business in exchange for capital. (Transaction (a) is answered as a guide.) a. Increase asset (Cash) Increase equity (Gibson, Capital) b. Purchased equipment for $5,000 on account. b.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:### Business Transactions and Accounting Equations for Elaine's Inflatables
**Elaine's Inflatables** earns service revenue by providing party planning services and inflatable playscapes. Elaine's Inflatables is organized as a sole proprietorship and owned by Elaine Gibson. During the past month, Elaine's Inflatables has the following transactions:
#### Transactions:
**Transaction (a) is answered as a guide.**
**Indicate the effects of the business transactions on the accounting equation for Elaine's Inflatables.** Use the following accounts:
- Cash
- Accounts Receivable
- Supplies
- Equipment
- Accounts Payable
- Gibson, Capital
- Gibson, Withdrawals
- Service Revenue
- Wages Expense
- Rent Expense
- Utilities Expense
---
#### Transactions:
**a. Gibson contributed $10,000 to the business in exchange for capital.**
*Increase asset (Cash); Increase equity (Gibson, Capital)*
**b. Purchased equipment for $5,000 on account.**
*Increase asset (Equipment); Increase liability (Accounts Payable)*
---
### Transaction Explanation:
**a.** When Gibson contributes $10,000 to the business, it increases the company's cash (an asset) by $10,000. Simultaneously, it increases Gibson's equity (Capital) in the business by $10,000.
- **Increase asset (Cash):** $10,000
- **Increase equity (Gibson, Capital):** $10,000
**b.** When the company purchases equipment for $5,000 on account, it increases the company's equipment (an asset) by $5,000. At the same time, it increases the company's liabilities (Accounts Payable) by $5,000, as the equipment is bought on account.
- **Increase asset (Equipment):** $5,000
- **Increase liability (Accounts Payable):** $5,000
### Diagram Explanation (Hypothetical Example):
If there was a diagram for this explanation, it might look like this:
- **Equation Before Transactions:**
- Assets = Liabilities + Owner’s Equity
- $0 = $0 + $0
- **After Transaction (a):**
- Assets = Liabilities + Owner’s Equity
- $10,000 = $0 + $10,000
- **After Transaction (b):**
- Assets = Liabilities +
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