Question

ASSELS - Lidollities + Stock + Earnings Exercise 1-6 Effect of transactions on general ledger accounts At the beginning of 2014, Foster Corp.'s accounting records had the following general le accounts and balances. FOSTER CORP. Accounting Equation Event Assets Liabilities + Acct. Titles for RE Stockholders' Equity Common Retained Stock Earnings Cash Notes Payable Land Balance 1/1/2014 30,000 16,000 10,000 20,000 16,000 Foster Corp. completed the following transactions during 2014: 1. Purchased land for $20,000 cash. 2. Acquired $10,000 cash from the issue of common stock, 3. Received 90,000 cash for providing services to customers 4. Paid cash operating expenses of $65,000. 5. Borrowed $20,000 cash from the bank. 6. Paid a $5,000 cash dividend to the stockholders. 7. Determined that the market value of the land purchased in event is $30,000 Required a. Record the transactions in the appropriate general ledger accounts. Record the amount revenue, expense, and dividends in the Retained Earnings column. Provide the appropre titles for these accounts in the last column of the table. b. As of December 31, 2014. determine the total amount of assets, liabilities, and stockholde equity and present this information in the form of an accounting equation. c. What is the amount of total assets, liabilities, and stockholders' equity as of January 1, 20

Answer 1

a.				Accounting equation
	Event	Assets		=	Liabilities	+	Stockholder's equity		Acct. Titles for RE
		Cash	Land		Notes payable		Common stock	Retained earnings
	Balance 1/1/2014	30000	16000		10000		20000	16000
	1	-20000	20000
	2	10000					10000
	3	90000						90000	Service revenue
	4	-65000						-65000	Operating expense
	5	20000			20000
	6	-5000						-5000	Dividend
	7	No entry required
	Balance 31/12/2014	60000	36000		30000		30000	36000
b.	Total assets=Total liabilities+Total stockholder's equity
	Total assets=Cash+Land=60000+36000=$ 96000
	Total liabilities=Notes payable=$ 30000
	Total stockholder's equity=Common stock+Retained earnings=30000+36000=$ 66000
	Total assets=Total liabilities+Total stockholder's equity
	96000=30000+66000
	96000=96000
c.	Total assets as of Jan 1,2015=Total assets as of Dec 31,2014=$ 96000
	Total liabilities as of Jan 1,2015=Total liabilities as of Dec 31,2014=$ 30000
	Total stockholder's equity as of Jan 1,2015=Total stockholder's equity as of Dec 31,2014=$ 66000