Question

Required information [The following information applies to the questions displayed below. Lisa Frees and Amelia Ellinger have been operating a catering business for several years. In March, the partners plan to expand by opening a retail sales shop. They have decided to form the business as a corporation called Traveling Gourmet, Inc. The following transactions occurred in March: a. Received $85,000 cash from each of the two shareholders to form the corporation, in addition to $2,500 in accounts receivable, $6,300 in equipment, a van (equipment) appraised at a fair value of $14,000, and $1,450 in supplies. Gave the two owners each 600 shares of common stock with a par value of $1 per share. b. Purchased a vacant store for sale in a good location for $410,000, making a $82,000 cash down payment and signing a 10-year mortgage note from a local bank for the rest. c. Borrowed $55,000 from the local bank on a 10 percent, one-year note. d. Purchased food and paper supplies costing $11,200 in March; paid cash. e. Catered four parties in March for $4,700; $1,700 was billed and the rest was received in cash. f. Sold food at the retail store for $17,150 cash; the food and paper supplies used cost $10,930. (Hint: Record two the revenue effect separate from the expense effect.) g. Received a $470 telephone bill for March to be paid in April. h. Paid $413 in gas for the van in March. i. Paid $7,280 in wages to employees who worked in March. j. Paid a $350 dividend from the corporation to each owner. k. Purchased $55,000 of equipment (refrigerated display cases, cabinets, tables, and chairs) and renovated and decorated the new store for $22,500 (added to the cost of the building); paid cash.

Answer 1

Transaction a. ته نه ئه Direction and Amount of Effect $170,000 ($85000*2) ($82,000) $55,000 ($11,200) $3,000 $17,150 Type of Activity Financing Investing Financing Operating Operating Operating No effect (for expense) No effect Operating Operating Financing Investing f.(i) f.(ii) h. i. j. k. ($413) ($7,280) ($350) ($77,500) (55000+22500)

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