Reference no: EM131832655

Question 1.

Grady Service Company, Inc., was organized by Chris Grady and five other investors. The following activities occurred during the first year:

a. Received $63,000 cash from the investors; each investor was issued 1,400 shares of capitalstock.

b. Signed an agreement with a new cleaning service to pay it $120 per week for cleaning thecorporate office. However the cleaning service does not commence until the following year.Payments will be made upon completion of service each week.

c. Received an additional contribution from investors who provided $4,000 in cash and landvalued at $13,000 in exchange for stock in the company.

d. Purchased equipment for use in the business at a cost of $16,000; one-fourth was paid in cashand the company signed a note for the balance (due in six months).

e. Lent $2,200 to one of the investors who signed a note due in six months.

f. Chris Grady borrowed $10,000 for personal use from a local bank, signing a one-year note.

*Based on the above information,

1. create T-account for the following accounts: Cash, Note Receivable, Equipment, Land, NotePayable, and Contributed Capital. Assume that the beginning balances are zero. For each of preceding transactions, record the effects of the transaction in appropriate T-accounts. Include good referencing and totals for each T-account. Write the journal entries for all transactions.

2. Using the balance in the T-accounts, fill in the following amounts for the accounting equation:

Assets $_____ = Liabilities_____$ + Stockholders' Equity $_____

3. Explain your answer to events(b) through (f). How does the firm account for those transactions?