Fundamentals of Financial Accounting
5th Edition
ISBN: 9780078025914
Author: Fred Phillips Associate Professor, Robert Libby, Patricia Libby
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 2, Problem 2.12E
Analyzing the Effects of Transactions Using T-Accounts; Preparing and Interpreting a Balance Sheet
Laser Delivery Services. Inc. (LDS) was incorporated January 1. The following transactions occurred during the year:
- a. Received $40,000 cash from the company’s founders in exchange for common stock.
- b. Purchased land for $12,000, signing a two-year note (ignore interest).
- c. Bought two used delivery trucks at the start of the year at a cost of $10,000 each; paid $2,000 cash and signed a note due in three years for $18,000 (ignore interest).
- d. Paid $2,000 cash to a truck repair shop for a new motor, which increased the cost of one of the trucks.
- e. Stockholder Jonah Lee paid $300,000 cash for a house for his personal use.
Required:
- 1. Analyze each item for its effects on the
accounting equation of LDS for the year ended December 31.
TIP: Transaction (a) is presented below as an example.
TIP: The new motor in transaction (d) is treated as an increase to the cost of the truck.
- 2. Record the effects of each item using a
journal entry .
TIP: Use the simplified journal entry format shown in the demonstration case on page 69.
- 3. Summarize the effects of the journal entries by account, using the T-account format shown in the chapter.
- 4. Prepare a classified balance sheet for LDS at December 31.
- 5. Using the balance sheet, indicate whether LDS’s assets at the end of the year were financed primarily by liabilities or stockholders’ equity.
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The following transactions apply to Pecan Co. for Year 1, its first year of operations:
1. Received $40,000 cash in exchange for issuance of common stock.
2. Secured a $111,000 ten-year installment loan from State Bank. The interest rate is 6 percent and annual payments are $15,081.
3. Purchased land for $25,000.
4. Provided services for $80,000.
5. Paid other operating expenses of $49,000.
6. Paid the annual payment on the loan.
Required
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare an income statement and balance sheet for Year 1.
c. What is the interest expense for Year 2? Year 3?
Complete this question by entering your answers in the tabs below.
Req B Inc
Stmt
Req B Bal
Sheet
Req A
Reg C
Prepare a balance sheet for Year 1.
PECAN COMPANY
Balance Sheet
As of December 31, Year 1
Assets
Determine the dollar effect on the accounting equation (increase or decrease assets, liabilities, or stockholders’ equity) from the following separate transactions.
a. Dillon contributes $4,000 of cash to his corporation in exchange for common stock.
b. Cowboy Corporation purchases equipment with a 10-year note payable for $1,600.
c. Queen Bee pays off $1,300 of accounts payable.
The following transactions apply to Pecan Co. for Year 1, its first year of operations:
1. Received $33,000 cash in exchange for issuance of common stock.
2. Secured a $101,000 ten-year installment loan from State Bank. The interest rate is 6 percent and annual payments are $13,723.
3. Purchased land for $27,000.
4. Provided services for $95,000.
5. Paid other operating expenses of $49.000.
6. Paid the annual payment on the loan.
Required
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare an income statement and balance sheet for Year 1.
c. What is the interest expense for Year 2? Year 3?
Complete this question by entering your answers in the tabs below.
Req A
Req B Inc
Stmt
Req B Bal
Sheet
Req C
Organize the transaction data in accounts under an accounting equation. (Enter any decreases to account balances with a minus sign. If there
is no effect on the Account Titles for Retained Earnings, leave the cell blank. Not all cells will require entry.)
Chapter 2 Solutions
Fundamentals of Financial Accounting
Ch. 2 - Define the following: a. Asset b. Current asset c....Ch. 2 - Define a transaction anti give an example of each...Ch. 2 - For accounting purposes, what is an account?...Ch. 2 - What is the basic accounting equation?Ch. 2 - Prob. 5QCh. 2 - Prob. 6QCh. 2 - Prob. 7QCh. 2 - What is a journal entry? What is the typical...Ch. 2 - What is a T-account? What is its purpose?Ch. 2 - Prob. 10Q
Ch. 2 - Prob. 11QCh. 2 - Which of the following is not an asset account? a....Ch. 2 - Which of the following statements describe...Ch. 2 - Total assets on a balance sheet prepared on any...Ch. 2 - The duality of effects can best be described as...Ch. 2 - The T-account is used to summarize which of the...Ch. 2 - Prob. 6MCCh. 2 - A company was recently formed with 50,000 cash...Ch. 2 - Which of the following statements would be...Ch. 2 - Prob. 9MCCh. 2 - Prob. 10MCCh. 2 - Prob. 2.1MECh. 2 - Prob. 2.2MECh. 2 - Matching Terms with Definitions Match each term...Ch. 2 - Prob. 2.4MECh. 2 - Prob. 2.5MECh. 2 - Prob. 2.6MECh. 2 - Prob. 2.7MECh. 2 - Identifying Events as Accounting Transactions Half...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Preparing Journal Entries For each of the...Ch. 2 - Posting to T-Accounts For each of the transactions...Ch. 2 - Reporting a Classified Balance Sheet Given the...Ch. 2 - Prob. 2.13MECh. 2 - Prob. 2.14MECh. 2 - Identifying Transactions and Preparing Journal...Ch. 2 - Prob. 2.16MECh. 2 - Prob. 2.17MECh. 2 - Prob. 2.18MECh. 2 - Prob. 2.19MECh. 2 - Prob. 2.20MECh. 2 - Prob. 2.21MECh. 2 - Prob. 2.22MECh. 2 - Prob. 2.23MECh. 2 - Prob. 2.24MECh. 2 - Prob. 2.25MECh. 2 - Prob. 2.1ECh. 2 - Prob. 2.2ECh. 2 - Classifying Accounts and Their Usual Balances As...Ch. 2 - Determining Financial Statement Effects of Several...Ch. 2 - Prob. 2.5ECh. 2 - Recording Journal Entries Refer to E2-4. Required:...Ch. 2 - Prob. 2.7ECh. 2 - Analyzing the Effects of Transactions in...Ch. 2 - Inferring Investing and Financing Transactions and...Ch. 2 - Analyzing Accounting Equation Effects, Recording...Ch. 2 - Recording Journal Entries and Preparing a...Ch. 2 - Analyzing the Effects of Transactions Using...Ch. 2 - Explaining the Effects of Transactions on Balance...Ch. 2 - Prob. 2.14ECh. 2 - Prob. 2.15ECh. 2 - Determining Financial Statement Effects of Various...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Determining Financial Statement Effects of Various...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Recording Transactions (in a Journal and...Ch. 2 - Determining Financial Statement Effects of Various...Ch. 2 - Prob. 2.2PBCh. 2 - Prob. 2.3PBCh. 2 - Prob. 2.1SDCCh. 2 - Prob. 2.2SDCCh. 2 - Prob. 2.4SDCCh. 2 - Prob. 2.5SDCCh. 2 - Accounting for the Establishment of a Business...
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