Problem 1
Suppose a company performs the following activities within a year. For each activity, perform transaction analysis and indicate the account, amount, and direction of the effect on the account equation. Use the following headings:
Assets = Liabilities + Stockholders' Equity
The activities are shown below.
(a) Purchased new equipment costing $20,000, paying $14,000 in cash and signing a note for the rest
(b) Declared $11,000 in dividends to be paid the following year
(c) Sold $2,312 in short-term investments for cash
(d) Investors sold their own stock to other investors on the stock exchange for $121,000
(e) Issued $1,000 of additional common stock shares, and received cash from investors
Problem 2
Shown below are several transactions for a corporation and what accounts are affected. Using the given dollar amounts, explain in words the transaction that took place. Use the transactions to create a balance sheet.
(a) Cash = +$8,000, Contributed Capital = +$8,000
(b) Cash = +$42,000, Note payable (short-term) = + $42,000
(c) Cash = -$2,000, Equipment +$5,000, Note payable (short-term) = +$3,000
(d) Cash = -$6,000, Note receivable (short-term) = +6,000
(e) Cash = -$1,800, Supplies = +$1,800
Problem 3
Given below is the balance sheet for a company.
Balance Sheet (Millions of Dollars)
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Assets
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Current Assets
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Cash
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$5,846
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Short-term investments
|
518
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Receivables and other assets
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4,510
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Inventories
|
607
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Other
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2,624
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$14,105
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Noncurrent Assets
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Property, plant, and equipment
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$1,594
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Long-term investments
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318
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Other non-current assets
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2,533
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Total assets
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$18,550
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Liabilities and Stockholders' Equity
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|
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Current Liabilities
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|
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Accounts payable
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$5,816
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Other short-term obligations
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4,585
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$10,401
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Long-term Liabilities
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$5,159
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Stockholders' equity
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|
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Contributed Capital
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$7,832
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Retained Earnings
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14,690
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Other stockholders' equity items
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-19,532
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Total stockholders' equity and liabilities
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$18,550
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Assume the following transactions (in millions) during the remainder of the initial year.
(a) Borrowed $20 from banks due in two years
(b) Lent $170 to affiliates, who signed a six-month note
(c) Purchased additional investments for $6,000 cash; one-third were long term and the rest were short-term
(d) Purchased $1820 worth of property, plant, and equipment; paid $600 in cash and the remainder with additional long-term bank loans
(e) Issued additional shares of stock for $400 in cash
(f) Sold short-term investments costing $3,000 for $3,000 cash
(g) Declared and paid $13 in dividends during Year 1
Prepare a journal entry for each transaction. Then create T-accounts for each balance sheet account and include the new transactions. Post each journey entry to the appropriate T-accounts. Finally, create an updated balance sheet.