Question

The following transactions are July 2014 activities of Craig’s Bowling, Inc., which operates several bowling centers (for games and equipment sales). a. Craig’s collected $15,000 from customers for games played in July. b. Craig’s sold bowling equipment inventory for $8,000; received $3,000 in cash and the rest on account. [Do not consider cost of goods sold for this question.] c. Craig’s received $4,000 from customers on account who purchased merchandise in June. d. The men’s and ladies’ bowling leagues gave Craig’s a deposit of $2,500 for the upcoming fall season.

For each of the following transactions, complete the tabulation, indicating the amount and net effect (+ for increase and − for decrease) of each transaction. (Remember that A = L + SE, R − E = NI, and NI affects SE through Retained Earnings.) The first transaction is provided as an example.

Answer 1

The tabulation format is not provided with the question. So I'm going to present it in a basic format. If there is any change in the format, please let me know in the comments. I'm more than happy to make the necessary changes to my answer.

a. Cash collected for games played in July: Cash is increased by 15000. That is shown as the increase in assets as cash is an asset. It also increases revenue and it affects Shareholder's Equity through Retained Earnings as mentioned in the question.

b. Sale of bowling equipment for cash and on account: Cash received is 3000. It is shown as increase in assets. Accounts receivable also increases by 5000. It is also an asset. Sales revenue of 8000 increases the Shareholder's Equity through Retained Earnings.

c. Amount received from customers on account: The accounts receivable already exist among the assets since it relates to the previous month. When cash is received, it increases assets. But it also decreases accounts receivable which is also an asset. Hence, total assets increase by 4000 and decreases by 4000.

d. Deposit received: Deposit may be of two types. It may be a security deposit that need to be refunded after a particular period of time. Or it could be unearned revenue. Either way, it is a liability. Therefore, liability increases by 2500. Cash received is an asset. Hence, assets also increase by 2500.

Hope this helps :)

Here is the answer in your requested format: