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For each of the transactions below, record whether it would result in an increase or decrease...

For each of the transactions below, record whether it would result in an increase or decrease in assets, liabilities, and net assets. Provide an answer for assets, liabilities, and net assets for each of the following transactions.

An organization:

Earns revenue Receives a donor pledge

Purchases supplies with cash

Purchases supplies on account

Takes out a loan

Repays loan principal

Receives payment on a pledge

Makes a payment on an amount it owes

Prepays for insurance

Uses prepaid insurance

Uses supplies

Uses a capital asset

Receives cash in advance of providing goods or services goods or services to a client.

Provides goods and services to a client in exchange for a cash payment that was made in advance.

Employs workers who earn wages

Pays employee wages that have been earned

Deems a portion of a pledge is uncollectible

Pays interest on a loan

Solutions

Expert Solution

NET ASSETS = ASSETS - LIABILITIES

1. Earns revenue Receives a donor pledge: Increase in Assets, No impact on Liabilities and Increase in Net Assets

Justification: It will increase the Accounts Receivable, so increase in assets and results in increase in Net Assets.

2. Purchases supplies with cash: No impact on Assets, no impact on liabilities and no impact on Net Assets

Justification: It will decrease Cash but will increase Inventories, so no impact on Assets. Thus, no impact on Net Assets.

3. Purchases supplies on account: Increase Assets, Increase Liabilities and No Impact on Net Assets

Justification: Purchases will increase Inventories which means Increase in assets. Purchases on account will Incraese in Creditors which means Increase in Liabilities. Thus no impact on Net Assets.

4. Takes out a loan: Increase in Assets, Increase in Liabilities and No impact on Net Assets

Justification: It will increase Cash/Bank will lead to increase in Assets. Loan will increase Liability. No impact on Net Assets

5. Repays loan principal: Decrease in Assets, Decrease in Liabilities and No Impact on Net Assets

Justification: Repayment of Loan will decrease in Cash/Bank, which results in decrease in Assets. It will also deacres liabilities. No impact of Net Assets

6. Receives payment on a pledge: No impact on Assets, no impact on liabilities and no impact on Net Assets

Justification: It will decrease Accounts Receivable and it will increase Cash, thus no impact on Assets. Hence, no impact on Net Assets

7. Makes a payment on an amount it owes: Decrease in Assets, Decraese in Liabilities and No impact on Net Assets

Justification: It will decrease in Cash therfore decrease in Assets. It will decrease Creditors therefore decrease in Liablities. No Impact on Net Assets

8. Prepays for insurance: No impact on Assets, Liabilities and Net Assets

Justification: It will increase in Assets due to prepaid insurance and decrease in assets due to decrease in Cash and no impact on assets

9. Uses prepaid insurance: No Impact on assets, Liabilities and Net Assets

Justifcation: Increase in Assets due to increase in Cash but decrease in assets due to decrease in Prepaid assets. So no impact on Assets or Net Assets

10. Uses supplies: Decrease in Assets, no impact on Liabilities and decrease in Net Assets

Justification: Decrease in Assets due to decrease in supplies and thus leads to decrease in Net assets

11. Uses a capital asset: Decrease in Assets, no impact on Liabilities and dcrease in Net Assets

Justification: Use of Captial Assets will decrease in Assets and decrease in Net Assets.

12. Receives cash in advance of providing goods or services goods or services to a client: Increase in Assets and Increase in Liabilities and no impact on Net Assets

Justification: Increase in Cash will result in Incraese in Assets, Increase in Deffered Revenue will increase in Liabilities. So no impact on Net Assets.

13. Provides goods and services to a client in exchange for a cash payment that was made in advance: Decrease in Assets, Decrease in Liabilities and no impact on Net assets

Justification: Decrease in Inventories leads to decrease in assets, decrease in Deffered revenue will decres in Liabilities. Hence no impact on Net Assets

14. Employs workers who earn wages: Decrease in Assets, no impact on liabilities and decrease in Net Assets

Justification: Decrease in cash leads to drcrease in assets and thus decrease in net assets.

15. Pays employee wages that have been earned: Decrease in Assets, decraese in liabilities and no impact on Net Assets

Justification: Decrease in cash leads to drcrease in assets, decrease in liabilities due to decrease i deffered payments. Thus no impact on Net Assets

16. Deems a portion of a pledge is uncollectible: Decrease in Assets, no impact on Liabilities and deacrease in Net Assets

Justification: Decrease in assets due to decrease in Accounts Recievable. Thus decrease in Net Assets

17. Pays interest on a loan: Decrease in Assets, Decrease in Liabilities and no impact on Net Assets

Justification: Decrease in Cash will lead to decrease in assets. Decrease in loan will lead to decrease in Liabilities. Thus no impact on Net Assets

jeff jeffy answered 1 year ago

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