Question

Check my work East Hill Home Healthcare Services was organized five years ago by four friends who each invested $14,000 in the company and, in turn, were issued in total 8,700 shares of $1.00 par value common stock. To date, they are the only stockholders. At the end of last year, the accounting records reflected total assets of $731,000 ($54,000 cash; $518,000 land; $56,000 equipment; and $103,000 buildings), total liabilities of $217,000 (short-term notes payable $106,000 and long-term notes payable $111,000), and stockholders' equity of $514,000 ($21,000 common stock; $83,000 additional paid-in capital; and $410,000 retained earnings). During the current year, the following summarized events occurred: a. Sold 9,700 additional shares of stock to the original organizers for a total of $94,000 cash. b. Purchased a building for $53,000, equipment for $11,000, and four acres of land for $19,000; paid $13,000 in cash and signed a note for the balance (due in 15 years). (Hint: Five different accounts are affected.) c. Sold one acre of land acquired in (b) for $4,750 cash to another company. d. Purchased short-term investments for $12,500 cash. e. One stockholder reported to the company that 400 shares of his East Hill stock had been sold and transferred to another stockholder for $3,600 cash. f. Lent one of the shareholders $5,900 for moving costs and received a signed, six-month note from the shareholder. Required: 1. Was East Hill Home Healthcare Services organized as a sole proprietorship, a partnership, or a corporation? 2. During the current year, the records of the company were inadequate. You were asked to prepare the summary of transactions shown above. To develop a quick assessment of their economic effects on East Hill Home Healthcare Services, you have decided to complete the tabulation that follows and to use plus (+) for increases and minus (-) for decreases for each account. The first event is used as an example. 4. Based only on the completed tabulation, provide the following amounts: 5. Compute the current ratio for the current year. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 4 Required 5 Was East Hill Home Healthcare Services organized as a sole proprietorship, a partnership, or a corporation? The company was organized as a Required 1 Required 2 >

Answer 1

East Hill Home Healthcare Services Requirement 1 It was organized as a corporation.Only a corporation issues shares of capital stock to its owners in exchange for their investment, as in transaction (a). Requirement 2 Assets Short-Term Notes + Investments + Receivable + Trans Land 518000 Beg. Liabilities + Stockholders' Equity ST Notes LT Notes + Contributed Retained + Building + Equipment = Payable + Payable + Capital + Earnings + 103000 + 56000 = 106000 + 111000 + 104000 + 410000 94000 + 53000 + 11000 70000 + + Cash 54000 94000 - 13000 4750 -12500 + + + + 19000 -4750 + + + + ته ان فا + 12500 + + + + + + + + + + + + -5900 121350 Totals + 12500 + 5900 5900 + 895000 532250 + 156000 + 67000 = 106000 + + 410000 181000 + 198000 895000 Requirement 4 Total assets = $121,350 + $12,500 + $5,900 + $532,250 + $156,000+ $67,000 = $895,000 Total liabilities = $106,000+ $181,000 = $287,000 Total stockholders' equity = Total assets - Total liabilities = $895,000 - $287,000 = $608,000 Cash balance = $54,000 + $94,000-$13,000+ $4,750 - $12,500-$5,900 = $121,350 Total current assets = Cash $121,350 + Short-Term Investments $12,500 + Notes Receivable $5,900 = $139,750 Requirement 5 Current Ratio = Current Assets / Current Liabilities = $121,350 + $12,500 + $5,900 / 106000 = $139,750 / 106000 = 1.32