On April 1, Julie Spengel established Spengel's Travel Agency. The following transactions were completed during the month:

1. Invested $20,000 cash to start the agency
2. Paid $600 cash for April office rent expense.
3. Purchased equipment for $3,000 cash.
4. Incurred $700 of advertising expense in the Chicago Tribune, on account.
5. Paid $900 cash for office supplies.
6. Performed services worth $10,000 on account.
7. Withdrew $600 cash for personal use

Requirements:

After recording the transactions in the worksheet, answer the following questions:

a-The effect of tran. 1 on the accounting equation is:

a. $20,000 decrease in cash and $20,000 decrease in capital.

b. $20,000 increase in cash and $20,000 increase in capital.

c. $20,000 decrease in cash and $20,000 increase in capital.

The effect of tran. 2 on the accounting equation is:

a. $600 increase in cash and $600 increase in owners equity (expense).

b. 600 decrease in cash and $600 decrease in owners equity (expense).

c. $600 decrease in cash and $600 increase in owners equity (expense).

The effect of tran. 3 on the accounting equation is:

a. $3,000 increase in Account payable and $3,000 increase in equipment.

b. $3,000 increase in cash and $3,000 increase in equipment.

c. $3,000 decrease in cash and $3,000 increase in equipment.

The effect of tran. 4 on the accounting equation is:

a. $700 increase in account payable and $700 decrease in owners equity (advertising expense).

b. $700 increase in cash and $700 decrease in owners equity (advertising expense).

c. $700 increase in cash and $700 increase in owners equity (service revenue).

The effect of tran. 5 on the accounting equation is:

a. $900 increase in cash and $900 increase in supplies.

b. $900 decrease in cash and $900 increase in supplies.

c. $900 increase in Account payable and $900 increase in supplies.

The effect of tran. 6 on the accounting equation is:

a. $10,000 increase in cash and $10,000 increase in owners equity (service revenue).

b. $10,000 increase in account receivable and $10,000 increase in owners equity (service revenue).

c. $10,000 increase in account receivable and $10,000 decrease in owners equity (service revenue).

The effect of tran. 7on the accounting equation is:

a. $600 decrease in cash and $600 increase in owners equity (expense).

b. $600 decrease in cash and $600 decrease in owners equity (drawing).

c. $600 increase in cash and $600 increase in owners equity (drawing).

Total Assets for April is:

a. $14,900

b. $6,000

c. $28,800

Total Owners Equity for April is:

a. $14,900

b. $28,800

c. $28,100

In April, Julie Spengel incurred net income of:

a. $10,000

b. $8,700

c. $4,400