Question

Penny Cassidy has decided to start her business, Penny's Pool Service & Supply, Inc. (PPSS). There is much to do when starting a new business. Here are some transactions that have occurred in PPSS in March. 5 eBook Print a. Received $29,000 cash and a large delivery van with a value of $40,000 from Penny, who was given 4,400 shares of $0.05 par value common stock in exchange. b. Purchased land with a small office and warehouse by paying $12,000 cash and signing a 10-year note payable to the local bank for $82,000. The land has a value of $20,000 and the building's value is $74,000. Use separate accounts for land and buildings c. Purchased new computer equipment from Dell for $2,900 cash, and purchased other office equipment for $4,400, signing a note payable due in six months to the office equipment manufacturer d. Hired a receptionist for the office at a salary of $1,900 per month, the receptionist will begin working for PPSS starting in April. e. Paid $1,400 on the note payable to the bank (in (b) above) at the end of March (ignore interest). f. Purchased short-term investments in the stock of other companies for $5,400 cash g. Ordered $14,000 in inventory from Pool Corporation, Inc., a pool supply wholesaler, to be received in April. eferences Required: 1. For each of the events, prepare journal entries if a transaction of the business exists, checking that debits equal credits. 2. Use the following T-accounts, and post each of the transactions to determine balances at March 31. Because this is a new business, beginning balances are $0. 3. Prepare a trial balance on March 31 to check that debits equal credits after the transactions are posted to the T-accounts. 4. From the trial balance prepare a classified balance sheet at March 31 (before the beginning of operations in April). 5. For each of the events indicate if it is an investing activity (or financing activity (P), and the direction (+ for increases; - for decreases) and amount of the effect on cash flows using the following structure. Select NE if there is no effect on cash flows. 6. Calculate the current ratio at March 31.

Answer 1

	Account Titles	Debit	Credit
a	Cash	$        29,000
	Delivery Van	$        40,000
	Common Stock		$             220
	Additional Paid-in Capital		$        68,780
b	Land	$        20,000
	Building	$        74,000
	Cash		$        12,000
	Notes Payable		$        82,000
c	Computer Equipment	$          2,900
	Office Equipment	$          4,400
	Notes Payable		$          7,300
d	No entry
e	Notes Payable	$          1,400
	Cash		$          1,400
f	Investment in Stock	$          5,400
	Cash		$          5,400
g	No entry

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