Johnson Waterworks Corporation provides plumbing services. Transactions during the first year of operations are provided below.
a) Received $14,000 cash and issued common stock to Mitchell Johnson.
b) Paid $1,300 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 $300 in rent for the year.
e) Paid $400 for plumbing supplies to be used on various jobs next year.
f) Completed a plumbing repair for a law firm and received $3,200.
Calculate the amount of total assets at the end of the first year. Assume the plumbing supplies of $400 are left at the end of the year.
A. $3,400
B. $20,200
C. $10,000
D. $12,000

We can easily find the increase in total assets by adding all cash receipt and than subtracting all payment made from it. However please note that payment made to acquire an other asset (property, plant and equipment) will not be taken as reduction from total assets. As these payment are not accounted as an expense but reduction of one asset in order to build an other asset. Detail Calculation is given below.

Receipt = a+c+f = 32,200 -A

Payment = (d) = (300) -B*

Total Asset = 31, 900 dollars

*Only rent payment will be taken as reduction.

Rent expense Debit 300

to Cash credit 300