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ACTIVITY 2.4 Q1 (A number of alternative solutions are possible) a) 1. Collected amount due from a customer (increase cash, decrease receivables). 2. Purchased land for cash (increase land and decrease cash). b) Paid amount due a creditor (decrease cash, decrease accounts payable). c) 1. Owner withdrew cash (decrease cash, decrease owner's capital). 2. Paid rent (decrease cash, decrease owner's capital). 3. Reflected supplies expense (decrease supplies on hand, decrease owner's capital). d) Borrowed money from a bank (increase cash, increase notes payable). Q2 a) b) c) d) e) f) g) No effect Decrease Decrease No effect Increase Increase Increase

Q3 Use accounting equation ASSETS = LIAB + (CAPITAL + EARNINGS) $400,000 Assets - $160,000 Liabilities = $240,000 Owners' Equity and - 200,000 (Capital) = $40,000 (Retained Earnings) Thus: Retained Earning = $40,000

Q4 a) Increase assets (Office Equipment) Decrease assets (Cash) b) Increase assets (Accounts Receivable) Increase owner’s equity (Capital) c) Decrease assets (Cash) Decrease owner’s equity (Capital) d) Increase assets (Cash) Increase owner’s equity (Capital) e) Increase Assets (Cash), Decrease Assets (Debtors) f) Increase assets (Supplies Increase liabilities (Accounts payable) g) Decrease assets (Cash) Decrease owners equity (Capital) h) Decrease liabilities (Accounts Payable) Decrease assets (Cash) i) Decrease owner’s equity (Capital) Decrease Assets (Cash)

Practice Question 1
Cars are the business’s main activity, thus it becomes either purchases or inventory. They should not be classified as Motor Vehicles as they are meant to be available for sale. The ledger presented below is in a different format compared to the one illustrated in class. This format can also be used by accountants to distinguish between entries made to the Dr and to the Cr. Most Banks use this format to do their accounting so that they can print and send individual T-accounts to their customers. Customers of a bank are regarded as

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