Question

Name(s) Class Time In-Class Case #2B Chapter 2 Hawking, Inc. had the following activities occur in the current year: 1. 2. 3. 4. Issued 2,000 shares of common stock for $350 cash per share. Purchased buildings for $175,000 and equipment for $80,000; paid $200,000 in cash and signed a long-term note payable for the rest. Purchased short-term investments for $10,000 cash. Several Hawking, Inc. investors sold 1,000 shares of their own stock to other investors on the stock exchange for $360 per share. Sold short-term investments for $5,000 in cash. 5. Required a) Show the effects of the above transactions on the accounting equation. b) Prepare journal entries for each transaction. Post journal entries to the general ledger/T-accounts, summarize each account and find a balance. c)

Answer 1

events	cash	short-term investment	building and equipment	accounts receivable	inventory	accounts payable	interest payable	long-term notes payable	common stock	Paid-In Capital in Excess of Par Value—Common	Equity
1	700000								700000
2	-200000		255000					55000
3	-10000	10000
4	360000								350000	10000
5	5000	-5000
total	855000	5000	255000		0			55000	1050000	10000
6					189000	189000
7	455600			80400							536000
8	-105000					105000					-210000
9							33000				-33000
total	350600	0	0	80400	189000	294000	33000	0	0	0	293000
over total	1205600	5000	255000	80400	189000	294000	33000	55000	1050000	10000	293000

Event	Journal entries	Dr. ($)	Cr. ($)
1	Cash	700000
	To common stock		700000
	(being issuance of stock)
2	Building	175000
	Equipment	80000
	To Cash		200000
	To Long-term notes payable		55000
	(being purchase of building and equipment)
3	Short-term investment	10000
	To Cash		10000
	(being purchase of short-term investment)
4	Cash (1000 shares * $360)	360000
	To Common stock (1000 shares * $350)		350000
	To Paid-In Capital in Excess of Par Value—Common		10000
	(being issuance of stock above face value)
5	Cash	5000
	To Short-term investment		5000
	(being sale of investment)

6	Inventory	189000
	To Accounts payable		189000
	(being purchase of inventory on account)
7	Cash	455600
	Accounts receivable	80400
	To Revenue		536000
	(bering 85% revenue received in cash and other on account)
8	Selling expense	210000
	To Cash		105000
	To accounts payable		105000
	(being half expense paid in cash remaining on account)
9	Interest expense	33000
	To Interest payable		33000
	(being interest expense incurred)

Trail Balance	Dr. ($)	Cr. ($)
Cash	1205600
Accounts receivable	80400
Revenue		536000
Selling expense	210000
Interest expense	33000
Interest payable		33000
Inventory	189000
Accounts payable		294000
Common stock		1050000
Building and equipment	255000
short-term investment	5000
paid-in capital in excess of par value		10000
Notes-payable		55000
Total	1978000	1978000
Income Statement	Amount ($)
Revenue	536000
Total revenue	536000
Expenses
selling expenses	210000
interest expense	33000
Total expense	243000
Net income	293000
Balance Sheet	Amount ($)	Amount ($)
Assets
Current assets
Cash	1205600
Investment	5000
Accounts receivable	80400
Inventory	189000
Total current assets		1480000
Long-term assets
Building and equipment	255000
Total long-term assets		255000
Total assets		1735000
Liabilities and stockholders equity
Current liabilites
accounts payable	294000
interest payable	33000
Total current liabilities		327000
Long-term liabilities
Long-term notes payable	55000
Total long-term liabilities		55000
Stockholders equity
Common stock	1050000
Paid-In Capital in Excess of Par Value—Common	10000
Retained earnings:
Net income	293000
Total stockholders equity		1353000
Total liabilities and stockholders equity		1735000

		Cash
1	common stock	700000	2	building	200000
4	common stock	350000	2	equipment
4	paid-in capital in excess of par value	10000	3	short-term investment	10000
5	short-term investment	5000		balance	855000
		1065000			1065000
		Common stock
			1	cash	700000
	balance	1050000	4	cash	350000
	total	1050000		total	1050000
		Building and equipment
2	cash	200000
2	long-term notes payable	55000		balance	255000
	total	255000			255000

		short-term investment
3	cash	10000	5	cash	5000
				balance	5000
	total	10000			10000
		paid-in capital in excess of par value
	balance	10000	4	cash	10000
	total	10000		total	10000
		notes-payable
	balance	55000	2	building and equipment	55000
	total	55000		total	55000

		Inventory
6	Accounts payable	189000		Bal	189000
	Total	189000		Total	189000
		Accounts payable
			6	Inventory	189000
	Bal	294000	8	Selling expense	105000
	Total	294000		Total	294000
		Cash
	Carry forward balance	855000	8	Selling expense	105000
7	Revenue	455600		Bal	1205600
	Total	1310600		Total	1310600
		Accounts receivable
7	Revenue	80400		Bal	80400
	Total	80400		Total	80400
		Revenue
			7	Cash	455600
	Bal	536000	7	Accounts receivable	80400
	Total	536000		Total	536000
		Selling expense
8	Cash	105000
8	Accounts payable	105000		Bal	210000
	Total	210000		Total	210000
		Interest expense
9	Interest payable	33000		Bal	33000
	Total	33000		Total	33000
		Interest payable
	Bal	33000	9	Interest expense	33000
	Total	33000		Total	33000