Reference no: EM13508666

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)

Assets
Current Assets
Cash	$5,846
Short-term investments	518
Receivables and other assets	4,510
Inventories	607
Other	2,624
	$14,105
Noncurrent Assets
Property, plant, and equipment	$1,594
Long-term investments	318
Other non-current assets	2,533
Total assets	$18,550
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$5,816
Other short-term obligations	4,585
	$10,401
Long-term Liabilities	$5,159
Stockholders' equity
Contributed Capital	$7,832
Retained Earnings	14,690
Other stockholders' equity items	-19,532
Total stockholders' equity and liabilities	$18,550

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.