Question

East Hill Home Healthcare Services was organized five years ago by four friends who each invested $10,000 in the company and, in turn, were issued in total 8,000 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 $741,000 ($64,000 cash; $516,000 land; $51,000 equipment; and $110,000 buildings), total liabilities of $228,000 (short-term notes payable $118,000 and long-term notes payable $110,000), and stockholders' equity of $513,000 ($21,000 common stock; $83,000 additional paid-in capital; and $409,000 retained earnings). During the current year, the following summarized events occurred: a. Sold 11,000 additional shares of stock to the original organizers for a total of $91,000 cash. b. Purchased a building for $59,000, equipment for $13,000, and four acres of land for $18,000; paid $16,000 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 $4,500 cash to another company. d. Purchased short-term investments for $13,500 cash. e. One stockholder reported to the company that 370 shares of his East Hill stock had been sold and transferred to another stockholder for $3,100 cash. f. 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.