Evaluate each of the following transactions in terms of their effect on assets, liabilities, and equity

Answer

Effect of Transactions on Assets ,Liabilities and Equity

1) Receive payment of $12,000 owed by a customer

Since,Customer account would already there in asset side of Balance sheet as Accounts receivables and by receiving payment from Customer ,Accounts receivables will get reduced and Bank/Cash Account will increase.

Therefore one asset(Accounts receivables) will reduce by $12,000 and other(Cash/Bank) will increase by $12,000 and this will leads to No effect on Total assets.

Also This will have no impact on Liabilities or Equity,Since earlier sales would have been recorded and now only paymentis received.

2. Purchase equipment for $45,000 in cash

Purchase of Equipment will Increase Fixed asset and will reduce cash

Therefore one asset(Cash) will reduce by $45000 and other(Fixed asset) will increase by $45000 and this will leads to No effect on Total assets.  

Also This will have no impact on Liabilities or Equity,Since Fixed asset and cash are both part of Asset side.

3. Issue $85,000 in stock

Issue of stock will Increase Equity as well as cash.

Therefore it will Increase Equity Side of Balance sheet and Cash will also Increase.Since,Equity is issued for cash.

So,Impact will be Increase in Equity and Increase in Assets(Cash) both by $85000 and no effect will be on Liability.

4. Borrow $67,000 from a bank

Borrow from bank will Increase Liability by Loan Amount and will also Increase Asset side due to Amount received in Bank.

However there will be no impact on Equity.

Therefore,Impact will be Increase in Liability and Increase in Asset both by $67000and No impact on Equity.