For each of the following transactions, show the effects on the entities involved. As was illustrated in the chapter, use the Assets = Liabilities + Owners’ equity (A = L + OE) equation to demonstrate the effects. Using the accounts in the illustration below, show the dollar amounts and indicate whether the effects are increases or decreases.

ILLUSTRATION

The Nebraska State Hospital collects $1,000 from the Blue Cross Health Care Plan.

1. Borrowing of $150,000 on a home mortgage from Fidelity Savings by David Stratton.
2. Payment of $10,000 principal on the preceding mortgage. Ignore interest.
3. Purchase of a 2-year subscription to Businessweek magazine for $90 cash by Cindy Silverton.
4. Purchase of used trucks by the U.S. Postal Service for $10 million cash from FedEx. The trucks were carried in the accounts at $10 million (original cost minus accumulated depreciation) by FedEx.
5. Purchase of U.S. government bonds for $100,000 cash by Lockheed Corporation.
6. Cash deposits of $18 on the returnable bottles sold by Safeway Stores to a retail customer, Philomena Simon.
7. Collections on open account of $100 by an Office Depot store from a retail customer, Gerald Arrow.
8. Purchase of traveler’s checks of $1,000 from American Express Company by William Spence.
9. Cash deposit of $600 in a checking account in Bank of America by Jeffrey Hoskins.
10. Purchase of a United Airlines “supersaver” airline ticket for $400 cash by Peter Tanlu on June 15. The trip will be taken on September10.

Transcribed Image Text:

+ OE Entity Cash Other Assets Trucks Liabilities Hospital +1,000 Blue Cross -1,000 1,000 = -1,000