Question

I. Clark Plumbing had the following transactions during the month of June, the first month of operations for the business: * The corporation issued 12,000 shares of capital stock to Bill Clark in exchange for his investment of $72,000 cash* Purchased $36,000 of equipment; made an $8,000 down payment and signed a note payable for the balance. * Made payment of $4,000 on the amount owed for equipment. Please answer the following: Make sure you show all your calculations – you may either use equations, T Accounts, or Journal Entries to arrive at your results, but show every step. a)   Compute the balance in the Cash account at the end of June. .b.b)   What are the total assets of Clark Plumbing at the end of June?. c. compute balance in note payble account at the end of june .. d) what is total amount of owner's equity at the end of june ... E) explain what is owners equity , and what can increase and decrease owner's equity ?

Answer 1

Answer to Question a and b:

Amount $ . $ 72,000 Question a: Particulars Opening Cash Balance Add: Cash receipts 1. Cash inflow by way of issue of equity shares Less: Cash Payments 1. Down payment for equipment 2. Payment for equipment Total Closing Cash Balance $ $ 8,000 4,000 $ 60,000 ($72,000 - $8,000 - $4,000) Question b: Particulars Closing Cash Balance Equipment Total Assets Amount $ 60,000 $ 35,000 $ 96,000 ($60,000 + 36,000)

Answer to Question c, d, and e:

Amount Question c: Particulars Opening Notes Payable balance Less: Payment Closing Balance of Notes Payable $ $ 28,000 4,000 $ 24,000 ($28,000 - $4,000) Question d: Owners equity balance will be $72,000 as that is the investment in the business Question e: Owners equity is the investment in the business. It gives the owner the right over the assets after subtracting the liabilities. Increase in owners equity is by way of additional investment and net income. Decrease in owners equity is by way of drawings (withdrawals)