A young man blew up balloons to craft into animals for the seven excited children that looked on.
A man is twisting a balloon into the shape of a dog.
A man with balloons for animals is not assumed to be twisting a balloon into the shape of a dog.
Just because a man is making balloon animals does not mean one is in the shape of a dog.
Sentence 1 says the man blew up balloons in the past tense, but doesn't say he is in the process of making balloon animals currently or that he is twisting them. Balloon animals don't have to be crafted into the shape of a dog, any animal in the animal kingdom can qualify.