Transaction 2, Loan from bank.

On January 2, 20_ _, Book Corner borrows from a bank, signing a promissory note for $50,000. This loan increases the asset, Cash, and the liability, Note payable, by the same amount. As always the sums of the individual account balances in each side of the equation are equal. Note that we will start analyzing the next transaction with the balance at the bottom.

Assets		=	Liabilities	+	Owners' Equity
	Cash		Note payable		Eugene, Capital
(1)	30,000	=			30,000
(2)	50,000	=	50,000
Bal.	80,000	=		80,000

Transaction 3, Acquire store equipment for cash.

On January 3, 20_ _, Book Corner acquires additional store equipment for $15,000 cash. Store equipment is a long-lived asset – an asset that the company expects to provide services for more than 1 year.

Assets			=	Liabilities			+	Owners' Equity
	Cash	Store Equipment			Note Payable		Eugene, Capital
Bal.	80,000		=		50,000		30,000
(3)	-15,000	15,000	=
Bal.	65,000	15,000	=		50,000		30,000
80,000					80,000

(3) We begin our new transaction analysis with the balance left over from the previous transaction (Bal. 80,000). This transaction, the cash purchase of store equipment, increases one asset, Store Equipment, and decreases another asset, Cash, by the same amount. The form of the assets change, but the total amount remains unchanged. The right side is completely unchanged.

(4) Book Corner can prepare a balance sheet at any point in time. The balance sheet for the next day after starting up the business will look like this:

Book Corner
Balance Sheet
January 3, 20_ _
Assets					Liabilities and Owners' Equity
Cash	$65,000			Liabilities (note payable)		$50,000
Store equipment	15,000			Eugene, capital		30,000
Total assets	$80,000			Total liabilities and owners' equity		$80,000

‘PUZZLE-3’ POINT

►Consider how to analyze each of the following additional transactions following the examples above: