Question

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Griffin Service Company, Inc., was organized by Bennett Griffin and five other investors. The following activities occurred during the year:

1. Received $79,000 cash from the six investors; each investor was issued 9,300 shares of common stock with a par value of $0.10 per share.
2. Purchased equipment for use in the business at a cost of $27,000; one-fourth was paid in cash and the company signed a note for the balance (due in six months).
3. Signed an agreement with a cleaning service to pay $210 per week for cleaning the corporate offices next year.
4. Received an additional contribution from investors who provided $3,900 in cash and land valued at $24,000 in exchange for 1,900 shares of stock in the company.
5. Lent $3,400 to one of the investors, who signed a note due in six months.
6. Bennett Griffin borrowed $7,900 for personal use from a local bank, signing a one-year note.

2. Using the balances in the T-accounts, fill in the following amounts for the accounting equation:

Answer is complete but not entirely correct.

	Assets $382selected answer incorrect = Liabilities $177selected answer incorrect + Stockholders' Equity $205selected answer incorrect

Answer 1

	ASSET = LIABILITY + EQUITY
	$27,000+$72,750+$24,000+$3400 = $20,250+$106,900
	$127,150 = $20,250 + $106,900
DR	EQUITY A/C		CR		DR	EQUIPMENT A/C		CR		DR	CREDITOR		CR
			$79,000			$27,000							$20,250
			$3,900
Bal b/d	$1,06,900		$24,000				Bal b/d	$27,000		Bal b/d	$20,250
	$1,06,900		$1,06,900			$27,000		$27,000			$20,250		$20,250
DR	CASH A/C		CR		DR	LAND A/C		CR		DR	RECEIVABLE A/C		CR
	$79,000		$6,750			$24,000					$3,400
	$3,900		$3,400
		Bal b/d	$72,750				Bal b/d	$24,000				Bal b/d	$3,400
	$82,900		$82,900			$24,000		$24,000			$3,400		$3,400