Reference no: EM13878895
Performance Plastics Company (PPC) has been operating for three years. The beginning account balances are:
During the year, the company had the following summarized activities:
a. Purchased equipment that cost $ 21,000; paid $ 5,000 cash and signed a two year note for the balance.
b. Issued an additional 2,000 shares of common stock for $ 20,000 cash.
c. Borrowed $ 50,000 cash from a local bank, payable June 30, in two years.
d. Purchased supplies for $ 4,000 cash.
e. Built an addition to the factory buildings for $ 41,000; paid $ 12,000 in cash and signed a three-year note for the balance.
f. Hired a new president to start January 1 of next year. The contract was for $ 95,000 for each full year worked.
Required:
1. Analyze transactions (a)-(f) to determine their effects on the accounting equation.
2. Record the transaction effects determined in requirement 1 using journal entries.
3. Summarize the journal entry effects from requirement 2. Use T- accounts if this requirement is being completed manually; if you are using the GL tool in Connect, the journal entries will have been posted automatically to general ledger accounts that are similar in appearance to Exhibit 2.9.
4. Explain your response to event (f).
5. Prepare a classified balance sheet at December 31.
6. As of December 31, has the financing for PPC's investment in assets primarily come from liabilities or stockholders' equity?