Question

The following transactions took place during the first year of business for ABC Company (Dollars given are in millions, use the numbers as shown, but make a note on your statements that the dollars are in millions). The firm's year-end is June 30. 1. Issued ABC Stock (received contribution from owners) in the amount of $250. 2. Borrowed $850 from a local bank with a 6-year note (ignore interest expense). 3. Purchased land for $650 cash. 4. Paid $25 for opening expenses. 5. Purchased new equipment for cash of $300. 6. Collected $800 from customers for services provided. 7. Paid salaries to employees of $480. 8. Purchased supplies for $20 on account, to be used in the coming year. 9. Paid dividends to new shareholders of $5. Question: Set up an accounting equation worksheet and record each transaction on the worksheet (Record the equipment purchase as an asset and ignore the fact that the equipment was probably used during the year. Also, ignore the interest expense on the bank note). Prepare the four basic financial statements from the worksheet.

          The following transactions took place during the first year of business for ABC Company (Dollars given are in millions, use the numbers as shown, but make a note on your statements that the dollars are in millions). The firm's year-end is June 30.

1. Issued ABC Stock (received contribution from owners) in the amount of $250.
2. Borrowed $850 from a local bank with a 6-year note (ignore interest expense).
3. Purchased land for $650 cash.
4. Paid $25 for opening expenses.
5. Purchased new equipment for cash of $300.
6. Collected $800 from customers for services provided.
7. Paid salaries to employees of $480.
8. Purchased supplies for $20 on account, to be used in the coming year.
9. Paid dividends to new shareholders of $5.

Question:
Set up an accounting equation worksheet and record each transaction on the worksheet (Record the equipment purchase as an asset and ignore the fact that the equipment was probably used during the year. Also, ignore the interest expense on the bank note). Prepare the four basic financial statements from the worksheet.

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Added by Agust-N P.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

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Solved by Expert Adi S

04/29/2024

Step 1

Set up the accounting equation worksheet: The accounting equation is: Assets = Liabilities + Owner's Equity We will record each transaction in the worksheet. | Transaction | Assets | Liabilities | Owner's Equity Show more…

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The following transactions took place during the first year of business for ABC Company (Dollars given are in millions, use the numbers as shown, but make a note on your statements that the dollars are in millions). The firm's year-end is June 30. 1. Issued ABC Stock (received contribution from owners) in the amount of $250. 2. Borrowed $850 from a local bank with a 6-year note (ignore interest expense). 3. Purchased land for $650 cash. 4. Paid $25 for opening expenses. 5. Purchased new equipment for cash of $300. 6. Collected $800 from customers for services provided. 7. Paid salaries to employees of $480. 8. Purchased supplies for $20 on account, to be used in the coming year. 9. Paid dividends to new shareholders of $5. Question: Set up an accounting equation worksheet and record each transaction on the worksheet (Record the equipment purchase as an asset and ignore the fact that the equipment was probably used during the year. Also, ignore the interest expense on the bank note). Prepare the four basic financial statements from the worksheet.

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Transcript

00:01 First, we have to prepare here the accounting equation.

00:20 Transaction $250 cash has been introduced in the business.

00:24 So, cash will be increased by $250 and common stock will be increased by $250.

00:29 Dollars in second one cash has been borrowed from not spable so the cash will be increased by 850 dollar and liability notes payable will be increased by 850 dollar the third transaction cash has been decreased because of the land purchased and the payment has been made in so land will be increased by 650 dollar and cash will be decreased by 650 dollar in the next entry, expenses has been incurred for $25.

01:02 So the cash has been decreased by $25 and $25 will be subtracted from retained earnings.

01:10 In the fifth entry, cash has been decreased with the amount of $300 with respect to equipment.

01:20 So equipment will increase by $300.

01:22 Dollars because revenue has been received so retained earnings eight hundred dollars will be added and cash added by eight hundred four eighty dollars has been paid as expense in the seventh transaction so 480 decreased from cash and 480 decreased from retained earnings supplies has been purchased on credit so 20 supplies will be increased in account payable increase by $20.

01:51 In the 9th entry, $5 cash will decrease and retained earning will decrease by $5.

01:57 So, after all the transactions, our balances are as cash $40, supply $20, equipment $300, land $650, accounts payable $20, notes payable $850, common stock $250, retained earning $200, so our income statement will be service revenue we have received are $800.

02:26 We will subtract expenses from it...

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