Problem 2 (16.5 points) Heavey and Lovas Furniture Repair Service, a company wit
ID: 1171104 • Letter: P
Question
Problem 2 (16.5 points) Heavey and Lovas Furniture Repair Service, a company with two stockholdens, began operations on June 1, 2016. The following T-accounts indicated the activities for the month of June. Part A- For each of the events (a)-(0), explain what transaction resulted. For full credit, explain which account increased and/or decreased and the event which occurred. Transaction (a) has been completed as an example. Accounts Service Revenue 2,000 (d) 5,000 (e) (a) 17,000 10,000 (b) (e) 5,000 1,500 (c) (O 1,800 Unearned Revenue Utilities 1,800 () (d) 2,000 (e) 1,500 Note Payable due 2018 40,000 (b) Build (b) 50,000 Common Stock 17,000 (a) (a) Issued common stock for $17,000 cash. Common stock increased and cash increased. (0Explanation / Answer
Part A
b) Purchased building worth $50,000 paying $10,000 in cash and issuing note for $40,000- building increased, Notes payable increased & cash decreased
c) Purchased supplies with cash for $17,000- supplies increased, cash decreased
d) Utilities expense for the month of June is due for payment $2,000 - Utilities expense increased accounts payable increased.
e) Service provided for cash – service revenue increased, cash increased
f) Cash received in advance for providing service.
Part B
a)
Current assets = $12,300 (cash)
b)
Total assets = $62,300 (cash+ building)
c)
Current liabilities = $3,800(accounts payable+ unearned revenue)
d)
Total liabilities = $43,800(accounts payable+ unearned revenue+ notes payable)
e)
Net income = $1,500 (Service revenue- supplies- utilities)
f)
Total assets of $62,300 is financed by around 30% stockholders and 70% by creditors. So we can say that the assets are primarily financed by creditors
a)
Current assets = $12,300 (cash)
b)
Total assets = $62,300 (cash+ building)
c)
Current liabilities = $3,800(accounts payable+ unearned revenue)
d)
Total liabilities = $43,800(accounts payable+ unearned revenue+ notes payable)
e)
Net income = $1,500 (Service revenue- supplies- utilities)
f)
Total assets of $62,300 is financed by around 30% stockholders and 70% by creditors. So we can say that the assets are primarily financed by creditors