Effects of Transactions on Elements of the Accounting Equation

question 55

Essay

Effects of transactions on elements of the accounting equation. Some of the transactions carried out by Tudor Wholesale during the first month of the company's operations are listed below. You are to determine the effect of each transaction on the total assets, the total liabilities, and the owners' equity. Prepare your answer in columnar form, identifying each transaction by letter and using the symbols (+) for increase, (-) for decrease, and (NC) for no change. An answer is provided for the first transaction to serve as an example.
$$\begin{array} { | l | c | c | c | } \hline { \text { Transactions } } & \begin{array} { c } \text { Total } \\\text { Assets }\end{array} & \begin{array} { c } \text { Total } \\\text { Liabilities }\end{array} & \begin{array} { c } \text { Owners' } \\\text { Equity }\end{array} \\\hline \text { A. Issued capital stock in exchange for cash } & + & \text { NC } & + \\\hline \begin{array} { l } \text { B. Bought land and a building at a total price } \\\text { of } \$ 165,000 \text {. Made a down payment of } \\\$ 65,000 \text { cash and signed a note payable for } \\\text { the balance. }\end{array} & & & \\\hline \begin{array} { l } \text { C. Bought adjoining lot for use as parking } \\\text { lot; paid cash in full }\end{array} & & & \\\hline \begin{array} { l } \text { D. Sold a portion of the land on credit at a } \\\text { price equal to its cost. }\end{array} & & & \\\hline \text { E. Obtained a loan from a bank. } & & & \\\hline \text { F. Purchased office equipment on credit. } & & & \\\hline \text { G. Paid a liability. } & & & \\\hline \begin{array} { l } \text { H. Collected part of amount owned to the } \\\text { business from purchaser of land. }\end{array} & & & \\\hline \begin{array} { l } \text { I. Sold another portion of the land for cash at } \\\text { a price in excess of cost. }\end{array} & & & \\\hline & & & \\\hline\end{array}$$

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Definitions:

Subsidizes Housing

A government support mechanism that helps reduce the cost of housing making it more affordable for low-income individuals.

Lump Sum Transfer

A one-time payment of money or resources, usually not expected to be repaid.

Budget Line

A graphical representation showing all possible combinations of two goods that can be purchased at given prices and income level.

Government Housing Assistance

Programs offered by the government to provide affordable housing or financial aid to individuals and families in need.