Question

CC2-1 Accounting for the Establishment of a Business [LO1, LO2, LO3, LO4, LO5] Nicole has decided that she is going to start her business, Nicole's Getaway Spa (NGS). A lot has to be done when starting a new business. Here are some transactions that have occurred prior to April 30, 2017 a. Received $78,300 cash when issuing 7,830 new shares. b. Purchased some land by paying $1,700 cash and signing a note payable for $8,500 due in 2017. c. Hired a new esthetician for a salary of $450 a month, starting next month. d. Bought $980 in soaps and aromatherapy supplies for the spa on credit. e. NGS purchased a company car for $18,000 cash (list price of $28,000) to assist in running errands for the business. f. Nicole sold 100 of her own personal shares to Raea Gooding for $800. g. Paid $240 of the amount owed in d.

Answer 1

Requirement 1:

No.	Transaction	General Journal	Debit	Credit
1	a	Cash	78,300
		Contributed capital		78,300
2	b	Land	10,200
		Cash		1,700
		Notes payable		8,500
3	c	No Journal entry required
4	d	Soaps and aromatherapy supplies	980
		Accounts payable		980
5	e	Equipment	18,000
		Cash		18,000
6	f	No Journal entry required
7	g	Accounts payable	240
		Cash		240

Requirement 2:

Cash					Soaps and Aromatherapy Supplies
Beg. Bal.	$0				Beg. Bal.	$0
a	78,300	b	1,700		d	980
		e	18,000
		g	240
End. Bal.	$58,360				End. Bal.	$980
Equipment					Land
Beg. Bal.	$0				Beg. Bal.	$0
e	18,000				b	10,200
End. Bal.	$18,000				End. Bal.	$10,200
Accounts payable					Notes payable
Beg. Bal.		$0			Beg. Bal.		$0
g	240	980	d				8,500	b
End. Bal.		740			End. Bal.		$8,500
Contributed Capital
Beg. Bal.		$0
		78,300	a
End. Bal.		$78,300

Requirement 3:

NICOLE'S GETAWAY SPA
Balance Sheet
At April 30,2017
Assets
Current Assets
Cash	$58,360
Soaps and aromatherapy supplies	$980
Total Current assets	$59,340
Land	$10,200
Equipment	$18,000
Total Assets	$87,540
Liabilities
Current Liabilities
Accounts payable	$740
Total current liabilities	$740
Notes payable	$8,500
Total liabilities	$9,240
Stockholders' Equity
Contributed capital	$78,300
Total stockholders' equity	$78,300
Total liabilities and stockholders' equity	$87,540

Requirement 4:

Current ratio = current assets ÷ current liabilities

= 59,340/740

= 80.2