Question

Required information Assume Down, Inc., was organized on May 1 to compete with Despair, Inc.-a company that sells de-motivational posters and office products. Down, Inc., encountered the following events during its first month of operations. a. Received $43,000 cash from the investors who organized Down, Inc. b. Borrowed $16,000 cash and signed a note due in two years. c. Ordered equipment costing $25,000. d. Purchased $7,000 in equipment, paying $3,000 in cash and signing a six-month note for the balance. e. Received the equipment ordered in (c), paid for half of it, and put the rest on account.

Answer 1

Answers

Balance Sheet
at May 31
Assets		Liabilities
Current Assets:		Current Liabilities:
Cash [43000 + 16000 - 3000 - 12500]	$43,500	Accounts Payable [25000 x 50%]	$12,500
		Notes Payable [7000 - 3000] short term	$4,000
		Total current liabilities	$16,500
Total Current Assets	$43,500
		Long Term Liabilities
		Notes Payable (Long Term)	$16,000
		Total Liabilities	$32,500
		Stockholder's Equity
		Common Stock	$43,000
Non Current Assets:		Retained Earnings	$0
Equipment [7000 + 25000]	$32,000	Total Stockholder's equity	$43,000
Total Non Current Assets	$32,000
Total Assets	$75,500	Total Liabilities & Stockholder's equity	$75,500