Inflatable Fun For All $($IFFA$)$ is your own business. You own two inflatable bouncy castles. Kids love them!

You keep them in a rented garage and drive your own truck to parks and neighbourhood special events. You use your own cell phone to take reservations for private parties and events..

Your first summer month's transactions are listed below.

May $1$ You set up a bank account and acquire a business credit card.

The bank will charge you a fee of $$12$ at the end of each month.

May $2$ You borrow $$4,000$ from the bank.

May $3$ You deposit $$3,000$ of your own money into the business bank

account.

May $4$ You rent a garage for the next six months for $$400$ per month,

paying the full amount now.

May $5$ You register your business name for $$60$ with Service Ontario,

using the business credit card.

May $6$ You purchase, using your business credit card, supplies for

$$500$ plus HST$.$

May $7$ You purchase, using your business credit card, two portable generators

for $$1,500$ each from Softie Supply. HST is included.

May $8$ You buy a one$-$year liability insurance policy for $$2,400,$ plus $8\%$ tax,

paying cash.

May $10$ You purchase for $$200$ cash, plus HST$,150$ colour flyers to advertise

your business. You haven't used any yet.

May $11$ You pay a student $$60$ cash to distribute half of your flyers.

May $12$ You gave a quotation to a prospecive block party organizer, to see if he liked it

and would recommend you. You would normally have asked for a $$100$ deposit,

but as you are just starting out, you didn't do that this time.

May $15$ Two more customers hire you to set up at their events. You will charge

them each $$500,$ and they each give you a deposit of $$100.$

May $27$ Business is blowing up$!$ You have so far collected $$2,000$ in cash from

happy party$-$goers.

May $28$ You now have only $$150$ worth of supplies left.

May $31$ One month's rent on your garage has expired.

May $31$ You received your cell phone bill for the month. Of the $$80,$

three$-$quarters $($i$.$e$.75\%)$ was business calls. You will pay it next month.

May $31$ One month of your insurance policy has expired.

May $31$ The bank takes its monthly charge from your account,

plus an additional $$16$ for interest on your loan.

May $31$ One of your May $15$ customers held his event today. He will

pay you his balance next week. The other customer's party is next weekend.

May $31$ You pay four$-$fifths $($i$.$e$.80\%)$ of the balance owing on your business

credit card. You will pay the rest next month.

REQUIRED $-$ Use the above information to answer all of the following questions.

How will IFFA record the May $1$ transaction? $(1$ mark$)$

a$.$ No entry is needed.

b$.$ decrease Cash and increase Bank Loan Payable, $$12$

c$.$ decrease Cash and increase Accounts Payable, $$12$

d$.$ increase both Cash and Owner's Capital, $$12$

Enter the letter that corresponds to your choice. $($A B C D$)$

A

How will IFFA record the May $2$ transaction? $(1$ mark$)$

a$.$ increase both Cash and Accounts Payable, $$4,000$

b$.$ increase both Cash and Bank Loan Payable, $$4,000$

c$.$ increase both Cash and Owner's Capital, $$4,000$

d$.$ increase both Cash and Revenue, $$4,000$

e$.$ increase both Cash and Retained Earnings, $$4,000$

Enter the letter that corresponds to your choice. $($A B C D E$)$

B

How will IFFA record the May $3$ transaction? $(1$ mark$)$

a$.$ increase both Cash and Accounts Payable, $$3,000$

b$.$ increase both Cash and Bank Loan Payable, $$3,000$

c$.$ increase both Cash and Owner's Capital, $$3,000$

d$.$ increase both Cash and Revenue, $$3,000$

e$.$ increase both Cash and Retained Earnings, $$3,000$

Enter the letter that corresponds to your choice. $($A B C D E$)$

C

How will IFFA record the May $4$ transaction? $(1$ mark$)$

a$.$ decrease Cash $$2,400$ and increase Rent Expense $$2,400$

b$.$ decrease Cash $$400$ and increase Rent Expense $$400$

c$.$ decrease Cash $$2,400$ and increase Prepaid Rent $$2,400$

d$.$ decrease Cash $$2,400,$ increase Rent Expense $$2,400$

e$.$ no entry is required.

Enter the letter that corresponds to your choice. $($A B C D E$)$

A

How will IFFA record the May $6$ transaction? $(1$ mark$)$

a$.$ increase both Equipment and Accounts Payable, $$565$

b$.$ increase Supplies Expense and decrease Cash, $$500$

c$.$ increase Supplies and decrease Cash,$$565$

d$.$ increase both Supplies Expense and Accounts Payable, $$565$

e$.$ increase both Supplies and Accounts Payable, $$565$

Enter the letter that corresponds to your choice. $($A B C D E$)$

E

How will IFFA record the May $7$ transaction? $(1$ mark$)$

a$.$ increase Supplies and decrease Cash, $$3,000$

b$.$ increase both Supplies Expense and Accounts Payable, $$3,000$

c$.$ increase Supplies Expense and decrease Accounts Payable, $$3,000$

d$.$ increase both Supplies and Accounts Payable, $$3,000$

e$.$ increase both Equipment and Accounts Payable, $$3,000$

f$.$ increase Equipment and decrease Cash, $$3,000$

Enter the letter that corresponds to your choice. $($A B C D E F$)$

E

How will IFFA record the May $8$ transaction? $(1$ mark$)$

a$.$ increase Prepaid Insurance and decrease Cash, $$2,592$

b$.$ increase both Insurance Expense and Accounts Payable, $$2,592$

c$.$ increase both Prepaid Insurance and Account