Question

East Hill Home Healthcare Services was organized on January 1, 2016, by four friends. Each organizer invested $10,000 in the company and, in turn, was issued 9.000 shares. To date, they are the only shareholders. At the end of 2017, the accounting records reflected total assets of $1,006,000 ($78,000 cash, $680,000 land, $78,000 equipment, and $170,000 buildings), total liabilities of $516,000 (short-term notes payable of $100,000 and long-term notes payable of $416,000), and shareholders' equity of $490,000 ($100.000 contributed capital and $390,000 retained earnings). The following summarized events occurred during January 2018: a. Sold 8,000 additional shares to the original organizers for a total of $80,000 cash. b. Purchased a building for $58,000, equipment for $15,000, and four acres of land for $13,000; paid $6,000 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 $5,000 cash to another company d. Purchased short-term investments for $15,000 cash. e. One shareholder reported to the company that he sold 600 East Hill shares to another shareholder for $6,000 cash. f. Lent $6,400 to one of the shareholders for moving costs, receiving a signed six-month note from the shareholder.

Answer 1

1 Corporation Assets Liabilities Stockholder' Equity Contributed Retained Capital Earnings 100.000 390,000 80,000 Beg + هي Short-Term Notes Short-term Long-term Cash Investments Receivable Land Buildings Equipment Notes Payable Notes Payable 78,000 680,000 170,000 78,000 = 100,000 416,000 80,000 (6,000) 13,000 58,000 15,000 = 80,000 3.250 (3.250) (15,000) 15,000 No Effect (6,400) 6,400 133,850 15,000 6,400 689,750 228.000 93.000 = 100,000 496,000 نه نه نه ن + 180,000 390,000 a. Total assets b. Total liabilties c. Total shareholder' equity d. Cash balance e. Total current assets 1,166,000 596,000 570,000 133,850 155,250 5 Current Ratio = Current Assets/Current Liabilties Current Ratio = 155,250/100,000 = 1.55