Assume Down, Inc., was organized on May 1 to compete with Despair, Inc.-a compan

Question

Assume Down, Inc., was organized on May 1 to compete with Despair, Inc.-a company that sells de-motivational posters and office products. Down, Inc., encountered the following events during its first month of operations. a. Received $31,000 cash from the investors who organized Down, Inc. b. Borrowed $16,000 cash and signed a note due in two years. c. Ordered equipment costing $13,000. d. Purchased $7,000 in equipment, paying $2,000 in cash and signing a six-month note for the balance. e. Received the equipment ordered in (d, paid for half of it, and put the rest on account 3. Prepare a classified balance sheet at May 31. Include Retained Earnings with a balance of zero. DOWN.INC Balance Sheet At May 31 Assets Liabilities Current Assets Current Liabilities

Explanation / Answer

DOWN INC Balance Sheet At May 31 Assets Liabilities Current Assets Current liabilities Cash             38,500 Notes Payable             5,000 Accounts Payable             6,500 Total current assets             38,500 Total current liabilities           11,500 Long term liabilities Notes Payable           16,000 Property,plant & equipment Total long term liabilities           16,000 Equipment             20,000 Property,plant & equipment             20,000 Stockholders Equity Common Stock           31,000 Retained Earnings                      -   Total Stockholders equity           31,000 Total Assets            58,500 Total Liabilities & Stockholders Equity         58,500

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