Question

The following information is provided for Pepper's Eatery at December 31, 2018. Adjusted Trial Balance Accounts payable Accounts receivable Cash Common stock (par S1) Inventory Land Long-term notes payable Prepaid expenses Plant & Equipment Retained earnings Supplies Short-term notes payable Short-term investments Utilities payable S32,500 40,000 7,000 7,680 2,500 40,000 2,000 3,340 17,200 16,200 1,500 54,700 2,800 1,260 Pepper's entered into the following transactions during January 2019: 1. Received $40,000 from customers for services provided in December 2018. 2. Paid $8,450 in advance for 3 months of rent. 3. Purchased inventory of $9,500 on account. 4. Issued 10,500 shares of common stock for $30,000. 5. Paid $1,260 for utilities incurred in December 2018 6. Purchased US Bonds for $6,000 redeemable 1/31/22 7. Sold land in exchange for $4,200 cash and a $25,000 note due 4/1/19. 8. Paid $8,275 in exchange for a pizza oven 9. Signed a $10,800 six-month notes payable for the CEO's personal use. 10. Declared and paid dividends of $3,000.

Answer 1

Sol (b): Below are the workings for T accounts:

Liabilities					Assets
Accounts Payable					Accounts Receivable
		31st Dec Balance	32500		31st Dec Balance	40000	Cash Received	40000
		Inventory Purchase	9500				No Balance C/f
31st Jan Bal	42000	Total	42000
					Cash
Common Stock					31st Dec Balance	7000	Advance Rent	8450
		31st Dec Balance	7680		AR Received	40000	Utilities	1260
		Fresh Issue	30000		Common Stock	30000	Bond Purchase	6000
31st Jan Bal	37680	Total	37680		Land	4200	Pizza Oven	8275
							Dividend Paid	3000
Utilities Payable					Total	81200	31st Jan Bal	54215
Cash Rec	1260	31st Dec Balance	1260
No Balance C/f					Inventory
					31st Dec Balance	2500
Long Term Notes Payable					Purchase	9500
		31st Dec Balance	2000		Total	12000	31st Jan Bal	12000
31st Jan Bal	2000	Total	2000
					Bond Investment
Retained Earning					Purchase	6000
Drawings	10800	31st Dec Balance	16200		Total	6000	31st Jan Bal	6000
Dividend	3000
31st Jan Bal	2400	Total	16200		Land
					31st Dec Balance	40000	Cash	4200
							Note Due	25000
Short Term Notes Payable					Total	40000	31st Jan Bal	10800
		31st Dec Balance	54700
		Six months Notes	10800		Notes Due
31st Jan Bal	65500	Total	65500		Land Considertion	25000
					Total	25000	31st Jan Bal	25000
					Plant & Equipment
					31st Dec Balance	17200
					Pizza Oven	8275
					Total	25475	31st Jan Bal	25475
					Prepaid Expenses
					31st Dec Balance	3340
					Total	3340	31st Jan Bal	3340
					Short Term Investment
					31st Dec Balance	2800
					Total	2800	31st Jan Bal	2800
					Prepaid Rent
					3 Months	8450
					Total	8450	31st Jan Bal	8450
					Supplies
					31st Dec Balance	1500
					Total	1500	31st Jan Bal	1500

Sol (c) Classified Balance sheet for 31st Jan 2019 as under:

Balance Sheet 31st Jan 2019
Liabilities
Common Stock	37680
Retained Earning	2400
Long Term Notes Payable	2000
Accounts Payable	42000
Short Term Notes Payable	65500
Total Liabilities	149580
Assets
Land	10800
Plant & Equipment	25475
Notes Due	25000
Bond Investment	6000
Inventory	12000
Supplies	1500
Prepaid Rent	8450
Short Term Investment	2800
Prepaid Expenses	3340
Cash	54215
Total Assets	149580

Sol (d) The working of Cash Flows from Investing and Financing activities are as under:-

Cash Flow Statement for January 2019

Cash flow from Investing Activities

a) Purchased Bonds

b) Pizza Oven Purchase

c) Sale of Land

Net Cash Flow from Investing Activities

Cash flow from Financing Activities

a) Issue of Common Stock

b) Payment of Dividend

Net Cash Flow from Financing Activities