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9. 10. 11. 12. 13. Received cash on account from Dr. Shephard, $150.00. Paid cash on account to Paws & Claws Co., $200.00. Paid cash for one month of insurance, $100.00. Received cash from sales, $475.00. Owner withdrew equity in the form of cash, $800.00. 1-C Challenge Problem: Determining how transactions change an accounting equation LO4, 5, 6 Linda Liu owns a tutoring service called Homework Helper. On October 30, Homework Helper's accounting equation indicated the following account balances. Use the form in your Working Papers to complete this problem. Assets Trans. No. Liabilities Cash Beg. Bal. 1 Accts. Rec.— 4Kids Daycare Supplies 7,542 1,265 Owner's Equity Prepaid Insurance Accts. Pay.— Ashley Tech Services Linda Liu, Capital 600 3,145 7,362 1,100 Instructions: 1. For each transaction, complete the following: a. Analyze the transaction to determine which accounts in the accounting equation are affected. b. Write the amount in the appropriate columns, using a plus sign (+) if the account increases or a minus sign (–) if the account decreases. c. For transactions that change owner's equity, write in parentheses a description of the transaction to the right of the amount. d. Calculate the new balance for each account in the accounting equation. e. Before going on to the next transaction, determine that the accounting equation is still in balance. 2. Answer the following questions. a. Why can the owner of a business withdraw assets from that business for personal use? b. Why would the owner withdraw assets other than cash? Transactions: 1. Took $300.00 of supplies for personal use. 2. Had computer repaired at Ashley Tech Services and agreed to pay Ashley Tech Services at a later date, $225.00. 3. Linda Liu sold her personal book collection for $750.00 cash. 4. Paid Ashley Tech Services, $125.00. 21st Century Skills Creativity and Innovation: Seize the Opportunity Theme: Financial, Economic, Business, and Entrepreneurial Literacy Skills: Critical Thinking and Problem Solving, Creativity and Innovation An entrepreneur is someone who creates a business. While an entrepreneur requires capital, determination, and risk-taking abilities, the entrepreneur must possess the vision to be a problem solver. When a problem is solved, a business opportunity is created. Famous inventor and entrepreneur Thomas Edison once said, "I find out what the world needs, then I proceed to invent it." 28 Chapter 1 Starting a Proprietorship: Changes That Affect the Accounting Equation