During the month, a company enters into the following transactions:

• Borrows $8,750 of cash from the bank by signing a formal agreement to repay the loan in 2 years.
• Buys $6,900 of new equipment on account.
• Pays off $4,900 of accounts payable.
• Pays off $2,450 of notes payable.

Required:

1. Show the effect of these transactions on the basic accounting equation.

2. Prepare the journal entries that would be used to record the transactions.