Ag Bio Tech (ABT) was organized on January 1 by four friends. Each organizer inv

ID: 2331825 • Letter: A

Question

Ag Bio Tech (ABT) was organized on January 1 by four friends. Each organizer invested $16,250 in the company and, in turn, was issued 13,000 shares of common stock. To date, they are the only stockholders. During the first month (January), the company had thee following five events a. Collected a total of $65,000 from the organizers and, in turn, issued common stock. b. Purchased a building for $79,000, equipment for $21,500, and three acres of land for $29,400; paid $36,250 in cash and signed a note for the balance, which is due to be paid in 15 years C. One stockholder reported to the company that 1,100 shares of his ABT stock had been sold and transferred to another stockholder for $11,000 cash. d. Purchased supplies for $5,250 cash e. Sold one acre of land for $9,800 cash to another company. Required 2. During the first month, the records of the company were inadequate. You were asked to prepare a summary of the preceding transactions. To develop a quick assessment of their economic effects on ABT, complete the spreadsheet that follows. 4. Based on the completed spreadsheet, compute the following amounts 5. As of January 31, has the financing for ABT's investment in assets primarily come from liabilities or stockholders' equity? Complete this question by entering your answers in the tabs below Required 2 Required 4Required 5 During the first month, the records of the company were inadequate. You were asked to prepare a summary of the preceding transactions. To develop a quick assessment of their economic effects on ABT, complete the spreadsheet that follows. (Enter any decreases to account balances with a minus sign.) Assets iabilitiesStockholders' Equity Notes Payable CommonRetained Stock Earnings Cash Supplies Land Building Equipment Beg End Required4

Explanation / Answer

Answers

Cash

Supplies

Land

Building

Equipment

Notes Payable

Common Stock

Retained Earnings

Beg

$ 16,250.00

$ 65,000.00

$ (36,250.00)

$ 29,400.00

$ 79,000.00

$ 21,500.00

$ 93,650.00

$ (5,250.00)

$ 5,250.00

$ 9,800.00

$ (9,800.00)

End

$ 49,550.00

$ 5,250.00

$ 19,600.00

$ 79,000.00

$ 21,500.00

$ 93,650.00

$ 81,250.00

$ -

---Notes---

>”Transaction ‘c’” will have no effect on company’s record when a shareholder transfers his shares. Shares are transferred by the shareholder daily on the stock market. These are personal transactions of that shareholder and not of the company.

>Transaction ‘e’: One acre of land is sold for $ 9800. Cost of 3 acres = $ 29400. Cost of 1 acre will be = 29400/3 = $ 9800. Since Cost = Sale value, there is no gain or loss recorded.

Questions

Working

Answer Amount

Total Assets

[Cash+Supplies+Land+Building+Equipment]

$ 174,900.00

Total Liabilities

[Notes Payable]

$ 93,650.00

Total Stockholder's Equity

[Common Stock + Retained Earnings]

$ 81,250.00

Cash balance

$ 49,550.00

Total Current Assets

[Cash + Supplies]

$ 54,800.00

The answer is LIABILITIES. Most of the Investment in Assets is primarily from LIABILIES. This is apparent from above figures which shows Liabilities amount GREATER than that of Equity.