Question

Business Sim Corp. (BSC) issued 1,000 common shares to Kelly in exchange for $10,000. BSC borrowed $31,000 from the bank, promising to repay it in two years. BSC paid $36,000 for computer equipment with check number 101 and signed a note for $3,000 due in six months. BSC received $500 of supplies purchased on account. BSC’s loan contains a clause (“covenant”) that requires BSC to maintain a ratio of current assets to current liabilities of at least 1.4.

Required information Business Sim Corp. (BSC) issued 1,000 common shares to Kelly in exchange for $10,000. BSC borrowed $31,000 from the bank, promising to repay it in two years. BSC paid $36,000 for computer equipment with check number 101 and signed a note for $3,000 due in six months. BSC received $500 of supplies purchased on account. BSC's loan contains a clause (covenant") that requires BSC to malntaln a ratlo of current assets to current llabillties of at least 1.4 Required: 1. Identify the transactions and analyze their accounting equation effects. (Enter any decreases to account balances with a minus sign.) Assets Liabilities Stockholders' Equity Totals

Answer 1

Answer

--Requirement 1

	ASSETS		LIABILITIES		STOCKHOLDER's EQUITY
1	Cash	$10,000			Common Stock	$10,000
2	Cash	$31,000	Bank Loan	$31,000
3	Cash	($36,000)	Notes Payable [Short term]	$3,000
	Equipment	$39,000
4	Supplies	$500	Accounts Payable	$500
	Total	$44,500		$34,500		$10,000