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The events that are occurred at Sunshine Company in its first year of business are given below:

a) To establish the company, the two owners contributed a total of $50,000 in exchange for common stock.

b) Grooming service revenue for first year amounted to $150,000 of which $40,000 was on account.

c) Customers are indebted $10,000 at the end of the year from services provided on an account.

d) At the beginning of year, a storage building was rented. Company was needed to sign a three-year lease for $12,000 per year and make a $2,000 refundable security deposit. First year’s lease payment and the security deposit were paid at the beginning of the year.

e) At the beginning of year, company purchased a patent at a cost of $100,000 for a revolutionary system to be used for dog grooming. Patent is expected to be useful for 10 years. Company paid 20% down in cash and signed the four-year note at the bank for the remainder.

f) Operating expenses, with amortization of the patent and rent on the storage building, totalled $80,000 for the first year. No expenses were accrued or unpaid at the end of the year.

g) The company stated and paid a $20,000 cash dividend at the end of the first year.

problem:

Create a balance sheet as of the end of the first year.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M910071

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