East Hill Home Healthcare Services was organized five years ago by four friends who each invested $13,000 in the company and, in turn, were issued in total 8,600 shares of $1.00 par value common stock. To date, they are the only stockholders. At the end of last year, the accounting records reflected total assets of $726,000 ($61,000 cash; $502,000 land; $53,000 equipment; and $110,000 buildings), total liabilities of $228,000 (short-term notes payable $118,000 and long-term notes payable $110,000), and stockholders' equity of $498,000 ($23,000 common stock; $91,000 additional paid-in capital; and $384,000 retained earnings). During the current year, the following summarized events occurred: a. Sold 10,600 additional shares of stock to the original organizers for a total of $93,000 cash. b. Purchased a building for $56,000, equipment for $19,000, and four acres of land for $24,000; paid $13,000 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 $6,000 cash to another company. d. Purchased short-term investments for $19,500 cash. e. One stockholder reported to the company that 390 shares of his East Hill stock had been sold and transferred to another stockholder for $4,000 cash. f. Lent one of the shareholders $5,200 for moving costs and received a signed, six-month note from the shareholder. g. Borrowed $7,000 from a local bank; signed a note due in six months. Required: 1. Was East Hill Home Healthcare Services organized as a sole proprietorship, a partnership, or a corporation? 2. During the current year, the records of the company were inadequate. You were asked to prepare the summary of transactions shown above. To develop a quick assessment of their economic effects on East Hill Home Healthcare Services, complete the tabulation that follows. The first event is used as an example. 4. Based only on the completed tabulation, provide the following amounts. 5. Compute the current ratio for the current year.

East Hill Home Healthcare Services was organized five years ago by four friends who each invested $13,000 in the company and, in turn, were issued in total 8,600 shares of $1.00 par value common stock. To date, they are the only stockholders. At the end of last year, the accounting records reflected total assets of $726,000 ($61,000 cash; $502,000 land; $53,000 equipment; and $110,000 buildings), total liabilities of $228,000 (short-term notes payable $118,000 and long-term notes payable $110,000), and stockholders' equity of $498,000 ($23,000 common stock; $91,000 additional paid-in capital; and $384,000 retained earnings). During the current year, the following summarized events occurred: a. Sold 10,600 additional shares of stock to the original organizers for a total of $93,000 cash. b. Purchased a building for $56,000, equipment for $19,000, and four acres of land for $24,000; paid $13,000 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 $6,000 cash to another company. d. Purchased short-term investments for $19,500 cash. e. One stockholder reported to the company that 390 shares of his East Hill stock had been sold and transferred to another stockholder for $4,000 cash. f. Lent one of the shareholders $5,200 for moving costs and received a signed, six-month note from the shareholder. g. Borrowed $7,000 from a local bank; signed a note due in six months. Required: 1. Was East Hill Home Healthcare Services organized as a sole proprietorship, a partnership, or a corporation? 2. During the current year, the records of the company were inadequate. You were asked to prepare the summary of transactions shown above. To develop a quick assessment of their economic effects on East Hill Home Healthcare Services, complete the tabulation that follows. The first event is used as an example. 4. Based only on the completed tabulation, provide the following amounts. 5. Compute the current ratio for the current year.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter22: S Corporations

Section: Chapter Questions

Problem 36P

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