Question

Quiz 1 Alyssa Plastic

Alyssa Plastic Company has been operating for three years. At December 31 of last year, the accounting records reflected the following:

Assets	Amount	Liabilities & Equity	Amount
Cash	$ 22,000	Accounts Payable	$ 15,000
Marketable Securities	3,000	Accrued Liabilities	4,000
Accounts Receivable	3,000	Notes Payable (Short Term)	7,000
Notes Receivable	1,000	Long-Term Notes Payable	47,000
Inventory	20,000	Common Stock	10,000
Equipment	50,000	Additional Paid-in Capital	80,000
Factory Building	90,000	Retained Earnings	31,000
Intangibles	5,000
Total Assets	$194,000	Total Liabilities & Equity	$194,000

During the current year, the company had the following summarized activities:

1. Purchased marketable securities for $10,000 cash.
2. Lent $5,000 to a supplier, who signed a two-year note.
3. Purchased equipment that cost $18,000; paid $5,000 cash and signed a one-year note for the balance.
4. Hired a new president at the end of the year. The contract was for $85,000 per year plus options to purchase company stock at a set price based on company performance.
5. Issued an additional 2,000 shares of $0.50 par value common stock for $11,000 cash.
6. Borrowed $9,000 cash as a short-term note payable from a local bank.
7. Purchased a patent for $3,000 cash.
8. Built an addition to the factory for $24,000; paid $8,000 in cash and signed a three-year note for the balance.
1. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000.

Required

1. Create a journal entry for each transaction.
2. Prepare a balance year as of December 31 of the current year.
3. Analyze the financial status of the company over this last year.

Answer 1

Journal Entries Account Title and Explaination Post Date Debit Credit Ref. S Marketable Securities $ 10,000.00 a Cash $ 10,000.00 (To record marketable securities purchased) Notes Receivable 5,000.00 Cash $ 5,000.00 (To cash lent in exchange of Note) Equipment 18,000.00 C Cash $ 5,000.00 Notes Payable (To record Equipment purchased and partly cash paid) S 13,000.00 No Journal Entry Required for Hiring New President d

Cash 11,000.00 e Common Stock (2000x$0.50) Additional Paid In Capital (To record Common Stock issued for Cash) $ 1,000.00 10,000.00 Cash f $ 9,000.00 Notes Payable (To record Cash borrowed by signing Note) 9,000.00 Patents 3,000.00 g Cash $ 3,000.00 (To record Patent Purchased) h Factory Building 90,000.00 Cash 8,000.00 Notes Payable (To record Factory Building Purchased) 82,000.00 Cash 1,000.00 Equipment (To record Equipment returned and cash collected) 1,000.00