CP2-3 Recording Transactions (in a Journal and T-Accounts); Preparing and Interp
ID: 2611988 • Letter: C
Question
CP2-3 Recording Transactions (in a Journal and T-Accounts); Preparing and Interpreting the Balance Sheet [LO 2-2, LO 2-3 LO 2- 4, LO 2-5] Performance Plastics Company (PPC) has been operating for three years. The December 31, 2015, account balances are: Cash Accounts Receivable Inventory Supplies Notes Receivable (due 2018) Equipment Buildings Land Accounts Payable Notes Payable (due 2019) Common Stock Retained Earnings $44,500 9,050 61,500 7,900 5,650 82,000 152,000 32,750 47,500 100,000 150,000 97850 During the year 2016, the company had the following summarized activities: a. Purchased equipment that cost $25,350; paid $9,450 cash and signed a two-year note for the balance b. Issued an additional 2,600 shares of common stock for $26,000 cash. c. Borrowed $61,000 cash from a local bank, payable June 30, 2018. d. Purchased supplies for $6,200 cash. e. Built an addition to the factory buildings for $69,750; paid $33,250 in cash and signed a three-year note for the balance Hired a new president to start January 1, 2017. The contract was for $95,000 for each full year worked. f.Explanation / Answer
1.Effect on accounting equation
2. Journal Entry
Assets Amount = Liabilities Amount + Stock holder Equity Amount a. Equipment 25,350 Notes payable 15,900 Cash -9450 b. Cash 26000 Common Stock 26000 c. Cash 61000 Borrowing 61000 d. Supplies 6200 Cash -6200 e. Factory building 69750 Notes payable 36500 Cash -33250 f. No Effect Total 139,400 113,400 26,000