Question

1. Pandey Inc. had the following activities during the month:

A. Borrowed $7,000,000 cash, signing a promissory note.

B. Bought a building for $800,000, paying $200,000 in cash and signing a promissory note for $600,000.

C. Rented equipment at a cost of $10,000 per month and issued a check covering six months' rent.

D. Provided $104,000 of services and billed customers.

E. Purchased $30,000 of supplies on account.

F. Received a utility bill for the current period in the amount of $1,200.

G. Raised sales prices on 200 units from $400 per unit to $440 per unit.

H. Received a 50% deposit from a customer on a $20,000 order to be filled next month.

I. Purchased 200 units of inventory for $400 per unit plus $1,000 shipping, on account

Required:

Analyze each of the activities (A) through (I) above with the goal of indicating their effects on the basic accounting equation by completing the table below. Indicate the accounts and amounts involved. Include a plus (+) or minus (−) sign before each number to show its effect on the accounting equation. If the activity should not to be recorded as a transaction, enter the word "None" in the first column for that activity.

Assets

Liabilities

Stockholders’ Equity

Answer 1

	Assets			=	liabilities			+	stock holder's equity
A	Cash	+	$7,000,000		Note Payable	+	$7,000,000
B	Cash	-	$200,000		Note Payable	+	$600,000
	Building	+	$800,000
C	Cash (10000*6)	-	$60,000						Rent Expense	-	$10,000
	Prepaid Rent (10000*5)	+	$50,000
D	Account Receivable	+	$104,000						Service Revenue	+	$104,000
E	Supplies	+	$30,000		Account Payable	+	$30,000
F					Utility Bill Payable	+	$1,200		Utility Expense	+	$1,200
G	None
H	Cash (50%*20000)	+	$10,000		Unearned Service Revenue	+	$10,000
H	Inventory ( 200*400+1000)	+	$81,000		Accoutn Payable	+	$81,000