FUNDAMENTALS OF FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781260584486
Author: PHILLIPS
Publisher: MCG
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Textbook Question
Chapter 2, Problem 1CP
Determining Financial Statement Effects of Various Transactions
Ag Bio Tech (ABT) was organized on January 1 by four friends. Each organizer invested $10,000 in the company and, in turn, was issued 8,000 shares of common stock. To date, they are the only stockholders. During the first month (January), the company had the following Five events:
- a. Collected a total of $40,000 from the organizers and. in turn, issued common stock.
- b. Purchased a building for $65,000, equipment for $16,000, and three acres of land for $18.000; paid $13,000 in cash and signed a note for the balance, which is due to be paid in 15 years.
- c. One stockholder reported to the company that 500 shares of his ABT stock had been sold and transferred to another stockholder for $5,000 cash.
- d. Purchased supplies for $3,000 cash.
- e. Sold one acre of land for $6,000 cash to another company.
Required:
- 1. Was ABT organized as a partnership or corporation? Explain the basis for your answer.
- 2. During the first month, the records of the company were inadequate. You were asked to prepare a summary of the preceding transactions. To develop a quick assessment of their economic effects on ABT, you have decided to complete the spreadsheet that follows and to use plus (+) for increases and minus (−) for decreases for each account.
TIP: Transaction (a) is presented below as an example.
- 3. Did you include the transaction between the two stockholders—event (c)—in the spreadsheet? Why?
TIP: Think about whether this event caused ABT to receive or give up anything.
- 4. Based only on the completed spreadsheet, provide the following amounts (show computations):
- a. Total assets at the end of the month.
- b. Total liabilities at the end of the month.
- c. Total stockholders’ equity at the end of the month.
- d. Cash balance at the end of the month.
- e. Total current assets at the end of the month.
- 5. As of January 31, has the financing for ABT’s investment in assets primarily come from liabilities or stockholders’ equity?
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Check out a sample textbook solutionChapter 2 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Ch. 2 - Define the following: a. Asset b. Current asset c....Ch. 2 - Define a transaction anti give an example of each...Ch. 2 - For accounting purposes, what is an account?...Ch. 2 - What is the basic accounting equation?Ch. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - What is a journal entry? What is the typical...Ch. 2 - What is a T-account? What is its purpose?Ch. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Which of the following is not an asset account? a....Ch. 2 - Which of the following statements describe...Ch. 2 - Total assets on a balance sheet prepared on any...Ch. 2 - The duality of effects can best be described as...Ch. 2 - The T-account is used to summarize which of the...Ch. 2 - Prob. 6MCCh. 2 - A company was recently formed with 50,000 cash...Ch. 2 - Which of the following statements would be...Ch. 2 - Prob. 9MCCh. 2 - Prob. 10MCCh. 2 - Prob. 1MECh. 2 - Prob. 2MECh. 2 - Matching Terms with Definitions Match each term...Ch. 2 - Prob. 4MECh. 2 - Prob. 5MECh. 2 - Prob. 6MECh. 2 - Prob. 7MECh. 2 - Identifying Events as Accounting Transactions Half...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Preparing Journal Entries For each of the...Ch. 2 - Posting to T-Accounts For each of the transactions...Ch. 2 - Reporting a Classified Balance Sheet Given the...Ch. 2 - Prob. 13MECh. 2 - Prob. 14MECh. 2 - Identifying Transactions and Preparing Journal...Ch. 2 - Prob. 16MECh. 2 - Prob. 17MECh. 2 - Prob. 18MECh. 2 - Prob. 19MECh. 2 - Prob. 20MECh. 2 - Prob. 21MECh. 2 - Prob. 22MECh. 2 - Prob. 23MECh. 2 - Prob. 24MECh. 2 - Prob. 25MECh. 2 - Prob. 1ECh. 2 - Identifying Account Titles The following are...Ch. 2 - Classifying Accounts and Their Usual Balances As...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Recording Journal Entries Refer to E2-4. Required:...Ch. 2 - Prob. 6ECh. 2 - Recording Journal Entries Refer to E2-6. Required:...Ch. 2 - Analyzing the Effects of Transactions in...Ch. 2 - Inferring Investing and Financing Transactions and...Ch. 2 - Analyzing Accounting Equation Effects, Recording...Ch. 2 - Recording Journal Entries and Preparing a...Ch. 2 - Analyzing the Effects of Transactions Using...Ch. 2 - Explaining the Effects of Transactions on Balance...Ch. 2 - Calculating and Evaluating the Current Ratio...Ch. 2 - Prob. 15ECh. 2 - Determining Financial Statement Effects of Various...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Prob. 1PACh. 2 - Recording Transactions (in a Journal and...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Determining Financial Statement Effects of Various...Ch. 2 - Prob. 2PBCh. 2 - Recording Transactions (in a Journal and...Ch. 2 - Finding and Analyzing Financial Information Refer...Ch. 2 - Finding and Analyzing Financial Information Refer...Ch. 2 - Prob. 4SDCCh. 2 - Prob. 5SDCCh. 2 - Accounting for the Establishment of a Business...
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