Susan Engel established Boston Bed & Breakfast as a sole proprietorship on July 1, 2009. The company's chart of accounts included the following:

Accounts Payable .......................... Notes Payable

Building ..................................... S. Engel, Capital

Cash .......................................... Supplies

Equipment

During the month of July, the company had the following activities:

(a) Received $160,000 cash from Susan Engel.

(b) Purchased a large existing bed and breakfast for $900,000; paid $90,000 as a down payment and signed a note payable from a local bank for the rest. The note is due on June 30, 2029.

(c) Purchased new kitchen appliances for $16,000 cash.

(d) Purchased supplies for $9,000 on account.

(e) Returned a defective appliance purchased in (c) for $3,000 and received a cash refund.

Required:

1. Analyze transactions (a)-(e) to determine their effects on the accounting equation. Use the format shown in the demonstration case on page 71.

2. Record the transaction effects determined in requirement 1 using a journal entry format.

3. Summarize the journal entry effects from requirement 2 using T-accounts.

4. Prepare a classified balance sheet at July 31, 2009.

5. As of July 31, 2009, has the financing for Boston Bed & Breakfast's assets primarily come from liabilities or owner's equity?