Reference no: EM132620766

On April 1, 2010; Steve Delancey, a college student started Goodbye Grass, a lawn care service business. Goodbye Grass's transactions to establish business through April 30, 2010, follows:

a) Received cash totaling $9,000 from Steve who will be the owner-manager of the business.

b) Acquired rakes and other hand tools (equipment) for $600, paying the hardware store $200 cash and agreeing informally to pay the balance in three months.

c) Ordered lawn mowers and edgers costing $4,000 from XYZ Law Supply, Inc.

d) Purchased four acres of land for the future site of a storage garage; paid cash $5,000.

e) Received the mowers and edgers that had been ordered in (c), and signed a promissory note to pay XYZ Lawn Supply in full in 60-days.

f) Sold one acre of land to the city for a park for $1,250 and accepted a note from the city indicating that Goodbye Grass will receive payment in six months.

g) Steve borrowed $3,000 from a local bank for personal use.

Required:

Question 1. Analyze each even to determine its effects on the accounting equation for Goodbye Grass.

Question 2. Prepare Journal entries to record the transactions (a) - (g).

Question 3. Set-up T-accounts for Cash, Note Receivable (from the city), Equipment (hand tools and mowing equipment), Land, Accounts Payable (to hardware stores), Note Payable (to the equipment supply company), and S. Delancey, Capital. Indicate the beginning balance of $0 in each T-account and then summarize the effect of each journal entry in the appropriate T-accounts.

Question 4. Use the amounts in the T-accounts developed in requirement 3 to prepare classified balance sheet for Goodbye Grass at April 30, 2010. Show the balances for all assets, liabilities and owner's equity accounts.

Question 5. As of April 30, 2010, has financing for Goodbye Grass's assets come primarily from liabilities or owner's equity?