Question

Tom started an engineering firm, Engineering Enterprises P.C. During its first month of operations, the following transactions were completed: I. Lori invested $33,000 in the business, which in turn issued common stock to her. II. The business purchased equipment on account for $6000. III. The business provided engineering services on account, $12,000. IV. The business paid salaries to the receptionist, $4000. V. The business received cash from a customer as payment on account $7000. VI. The business borrowed $9000 from the bank, issuing a note payable.

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To summarize the transactions:

I. Lori invested $33,000 in the business, issuing common stock.

II. Equipment was purchased on account for $6,000.

III. Engineering services were provided on account for $12,000.

IV. Salaries of $4,000 were paid to the receptionist.

V. Cash of $7,000 was received from a customer as payment on account.

VI. The business borrowed $9,000 from the bank, issuing a note payable.

The total assets increased by $33,000 (Lori's investment) + $6,000 (equipment) + $7,000 (cash received) = $46,000.

The total liabilities and equity increased by $33,000 (Lori's investment).

Therefore, the accounting equation after these transactions is:

Assets = Liabilities + Equity

Assets increase by $46,000

Liabilities and Equity increase by $33,000

\text{Assets} = \text{Liabilities} + \text{Equity}

\$46,000 = \text{Liabilities} + \$33,000

\text{Liabilities} = \$46,000 - \$33,000

\text{Liabilities} = \$13,000

Answer: $\$13,000$

I. Lori invested $33,000 in the business, issuing common stock.

II. Equipment was purchased on account for $6,000.

III. Engineering services were provided on account for $12,000.

IV. Salaries of $4,000 were paid to the receptionist.

V. Cash of $7,000 was received from a customer as payment on account.

VI. The business borrowed $9,000 from the bank, issuing a note payable.

The total assets increased by $33,000 (Lori's investment) + $6,000 (equipment) + $7,000 (cash received) = $46,000.

The total liabilities and equity increased by $33,000 (Lori's investment).

Therefore, the accounting equation after these transactions is:

Assets = Liabilities + Equity

Assets increase by $46,000

Liabilities and Equity increase by $33,000

Answer: $\$13,000$

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