Question

Homework 2

Using the two basic accounting equation solve the following.

1- Isaac invests $24000 in his business.

How much is the value of each?

a. Assets = _____________________

b. Liabilities = 0

c. Owners Equity = _________________

2- He then buys a truck for $12000 and a plow for $1000, to start a snow plowing business. He pays $3000 cash and borrows the rest.

How much is the value of each?

a. Assets = (add 12000 and 1000 to assets then subtract 3000 cash)

b. Liabilities = ___________________

c. Owners’ Equity = _________________

3- He then pays $300 dollars for social media advertising. He gets several snow plowing jobs and earns $600. He pays $100 for the gas he uses.

How much is the value of each?

a. Assets = _____________________

b. Liabilities = Unchanged from above

c. Owners’ Equity = _________________

d. Total Revenue = ________________

e. Total Expenses = $400

4- Isaac then pays another $2000 towards the truck loan. He also buys a snow blower so he can do walkways as well as driveways. He pays $700 cash for the snowblower.

How much is the value of each?

a. Assets = _____________________

b. Liabilities = ___________________

c. Owners’ Equity = Unchanged

5- Isaac completes several more plowing jobs and earns $1100 more. He spends $300 more on gas and pays $400 for the months’ rent on a garage to store his equipment.

How much is the value of each?

a. Assets = $32,600 (this is what you should have gotten)

b. Liabilities = ___________________

c. Owners’ Equity = _________________

Answer 1

Assets	Liabilities	Owners Equity
$24,000	$0	$24,000
$34,000 (add 12000 and 1000 to assets then subtract 3000 cash)	$10,000 (borrowings)	$24,000
$34,200 (subtract $300 and $100 and then add $600)	$10,000 (borrowings)	$24,200 (subtract $300 and $100 (expenses) and then add $600 - revenue)
$32,200 (subtract $2,000 and $700 and add $700)	$8,000 ($10,000 - $2,000 paid)	$24,200
$32,600 (subtract $300 and $400 and add $1,100)	$8,000	$24,600 (subtract expenses $300 and $400 and add Revenue $1,100)

Please find the solution for the accounting equation above, the underlined are the amounts that are to be entered in the blanks for the transactions 1 - 5.

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