Sharon Samson starts a plumbing service called Reliable Waterworks. Transactions of Reliable Waterworks during the first year of operations are given below:
A. Sharon deposited $14,000 into a new checking account for the business and recorded the capital contribution.
B. Paid $2,000 cash for equipment to be used for plumbing repairs.
C. Borrowed $15,000 from a local bank and deposited the money in the checking account.
D. Paid $600 rent for the year.
E. Purchased $900 of office supplies by cash.
F. Completed a plumbing repair project for a local lawyer and received $3,500 cash.
Calculate the amount of total liabilities at the end of the first year.

Question

Quizplus · Accepted Answer

There are no expenses or purchases on credit, therefore there are no accounts payable or other current or long-term liabilities. The only liability is the loan from the bank, which is $15,000. The capital contribution and the equipment purchase are recorded as owner's equity, and the rent and office supplies are recorded as expenses but do not create any liabilities. The cash received from the plumbing repair project is also recorded as revenue and does not affect liabilities.

Sharon Samson Starts a Plumbing Service Called Reliable Waterworks