Question

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 $726,000 ($53,000 cash; $511,000 land; $51,000 equipment; and $111,000 buildings), total liabilities of $223,000 (short-term notes payable $120,000 and long-term notes payable $103,000), and stockholders’ equity of $503,000 ($22,000 common stock; $87,000 additional paid-in capital; and $394,000 retained earnings). During the current year, the following summarized events occurred:

1. Sold 10,200 additional shares of stock to the original organizers for a total of $103,000 cash.
2. Purchased a building for $65,000, equipment for $13,000, and four acres of land for $21,000; paid $13,000 in cash and signed a note for the balance (due in 15 years). (Hint: Five different accounts are affected.)
3. Sold one acre of land acquired in (b) for $5,250 cash to another company.
4. Purchased short-term investments for $19,000 cash.
5. One stockholder reported to the company that 300 shares of his East Hill stock had been sold and transferred to another stockholder for $3,000 cash.
6. Lent one of the shareholders $5,100 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 Compute the current ratio for the current year. (Round your answer to 2 decimal places.) Current ratio < Required 4 Required 5

Answer 1

	Cash	Short term investments	Notes Receivable	land	Building	Equipment	Short-term Notes payable	Long-term Notes payable	Common Stock	Additional paid in capital	retained Earnings
Beg	53000			511000	111000	51000	120000	103000	22000	87000	394000
a	103000								10200	92800
b	-13000			21000	65000	13000		86000
c	5250			-5250
d	-19000	19000
e
f	-5100		5100
Total	124150	19000	5100	526750	176000	64000	120000	189000	32200	179800	394000

Total assets = 134800+19000+5700+516500+162000+65000=	915000
Total Liabilities = 120000+189000=	309000
Total stockholders' Equity = 32200+179800+394000=	606000
Cash balance =	124150
Total current assets = 124150+19000+5100=	148250
Current ratio = Current Assets / Current Liabilities
=148250/120000=	1.24