Question

Glenn Grimes is the founder and president of Heartland Construction, a real estate development venture. The business transactions during February while the company was being organized are listed as follows. Grimes and several others invested $600,000 cash in the business in exchange for 30,000 shares of capital stock (each share of stock is valued at $20) Feb. 1 The company purchased office facilities for $360,000, of which $120,000 was applicable to the land and $240,000 to the building. A cash payment of $72,000 was made and a note payable was issued for the balance of the purchase price. Feb. 10 Computer equipment was purchased from PCWorld for $14,400 cash. Feb. 16 Office furnishings were purchased from Hi-Way Furnishings at a cost of $10,800. A $1,200 cash payment was made at the time of purchase, and an agreement was made to pay the remaining balance in two equal installments due March 1 and Feb. 18 April 1. Hi-Way Furnishings did not require that Heartland sign a promissory note. Office supplies were purchased from Office World for $360 cash Feb. 22 Feb. 23 Heartland discovered that it paid too much for a computer printer purchased on February 16. The unit should have cost only $359, but Heartland was charged $395. PCWorld promised to refund the difference within seven days. Feb. 27 Mailed Hi-Way Furnishings the first installment due on the account payable for office furnishings purchased on February 18. Received $36 from PCWorld in full settlement of the account receivable created on February 23. Feb. 28 Instructions Prepare journal entries to re cord these transactions. Select the appropriate account titles from the following chart of accounts. a. Cash Land Office Building Accounts Receivable Office Supplies Office Furnishings Computer Systems Notes Payable Accounts Payable Capital Stock b. Indicate the effects of each transaction on the company's assets, liabilities, and owners equity for the month of February. Organize your analysis in tabular form as shown for the February 1 transaction. Transaction Owners' Equity Assets Liabilities +$600,000 (Cash) +$600,000 (Capital Stock) Feb. 1 $0

Answer 1

Date

Particulars

Debit ($)

Credit ($)

Transaction

Assets

=

Liabilities

+

Owners Equity

Feb-01

Cash

6,00,000.0

Feb-01

+ 600000 (cash)

=

0

+

+ 600000 (Capital Stock)

Capital Stock

6,00,000.0

Feb-10

+ 120000 (Land)

=

+ 288000 (Notes Payable)

+

0

+ 240000 (Office building)

Feb-10

Land

1,20,000.0

- 72000 (cash)

Office Building

2,40,000.0

Feb-16

+ 14400 (computer systems)

=

0

=

0

Notes payable

2,88,000.0

- 14400 (cash)

Cash

72,000.0

Feb-18

+ 10800 (office furnishings)

=

+ 9600 (Accounts Payable)

=

0

- 1200 (cash)

Feb-16

Computer systems

14,400.0

Feb-22

+ 360 (office supplies)

=

0

=

0

Cash

14,400.0

- 360 (cash)

Feb-23

+ 36 (Accounts Receivable)

=

0

=

0

Feb-18

Office Furnishings

10,800.0

- 36 (computer systems)

Cash

1,200.0

Feb-28

+ 36 (cash)

=

0

=

0

Accounts payable

9,600.0

- 36 (Accounts Receivable)

Mar-01

- 4800 (cash)

=

- 4800 (Accounts Payable)

=

0

Feb-22

Office Supplies

360.0

Apr-01

- 4800 (cash)

=

- 4800 (Accounts Payable)

=

0

Cash

360.0

Feb-23

Accounts Receivable

36.0

Computer Systems

36.0

Feb-28

Cash

36.0

Accounts Receivable

36.0

Mar-01

Accounts Payable

4,800.0

Cash

4,800.0

(paid for 1st installment to Hi- Way furnishings)

Apr-01

Accounts Payable

4,800.0

Cash

4,800.0

(paid for 2nd installment to Hi- Way furnishings)