P2-3 Recording Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the Current Ratio LO2-2, 2-4, 2-5
Cougar Plastics Company has been operating for three years. At December 31, 2014, the accounting records reflected the following:
| Cash |
$ |
22,000 |
|
Accounts payable |
$ |
15,000 |
| Investments (short-term) |
3,000 |
|
Accrued liabilities payable |
4,000 |
| Accounts receivable |
3,000 |
|
Notes payable (short-term) |
7,000 |
| Inventory |
|
20,000 |
|
Long-term notes payable |
47,000 |
| Notes receivable (long-term) |
1,000 |
|
Common stock |
|
10,000 |
| Equipment |
|
50,000 |
|
Additional paid-in capital |
80,000 |
| Factory building |
90,000 |
|
Retained earnings |
|
31,000 |
| Intangibles |
|
5,000 |
|
|
|
|
During the year 2015, the company had the following summarized activities:
a. Purchased short-term investments for $10,000 cash.
b. Lent $5,000 to a supplier who signed a two-year note.
c. Purchased equipment that cost $18,000; paid $5,000 cash and signed a one-year note for the balance.
d. Hired a new president at the end of the year. The contract was for $85,000 per year plus options to purchase company stock at a set price based on company performance.
e. Issued an additional 2,000 shares of $0.50 par value common stock for $11,000 cash.
f. Borrowed $9,000 cash from a local bank, payable in three months.
g. Purchased a patent (an intangible asset) for $3,000 cash.
h. Built an addition to the factory for $24,000; paid $8,000 in cash and signed a three-year note for the balance.
i. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000.
Required:
1. & 2. Record each necessary entry for the events in 2015 in T-accounts (including referencing) and determine the ending balances. The balances at the end of 2014 have been entered as beginning balances for 2015.
(Transaction (a) has been completed in the T-accounts as an example.)