P2-3 Recording P2-3 Recording Transactions in T-Accounts, Preparing the Balance
ID: 2484253 • Letter: P
Question
P2-3 Recording P2-3 Recording Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the Current Ratio LO2-2, 2-4, 2-5 Cougar Plastics Company has been operating for three years. At December 31, 2014, the accounting records reflected the following: Cash $ 22,000 Accounts payable $ 15,000 Investments (short-term) 3,000 Accrued liabilities payable 4,000 Accounts receivable 3,000 Notes payable (short-term) 7,000 Inventory 20,000 Long-term notes payable 47,000 Notes receivable (long-term) 1,000 Common stock 10,000 Equipment 50,000 Additional paid-in capital 80,000 Factory building 90,000 Retained earnings 31,000 Intangibles 5,000 During the year 2015, the company had the following summarized activities: a. Purchased short-term investments for $10,000 cash. b. Lent $5,000 to a supplier who signed a two-year note. c. Purchased equipment that cost $18,000; paid $5,000 cash and signed a one-year note for the balance. d. Hired a new president at the end of the year. The contract was for $85,000 per year plus options to purchase company stock at a set price based on company performance. e. Issued an additional 2,000 shares of $0.50 par value common stock for $11,000 cash. f. Borrowed $9,000 cash from a local bank, payable in three months. g. Purchased a patent (an intangible asset) for $3,000 cash. h. Built an addition to the factory for $24,000; paid $8,000 in cash and signed a three-year note for the balance. i. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000. Required: 1. & 2. Record each necessary entry for the events in 2015 in T-accounts (including referencing) and determine the ending balances. The balances at the end of 2014 have been entered as beginning balances for 2015. (Transaction (a) has been completed in the T-accounts as an example.) Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the Current Ratio LO2-2, 2-4, 2-5 Cougar Plastics Company has been operating for three years. At December 31, 2014, the accounting records reflected the following: Cash $ 22,000 Accounts payable $ 15,000 Investments (short-term) 3,000 Accrued liabilities payable 4,000 Accounts receivable 3,000 Notes payable (short-term) 7,000 Inventory 20,000 Long-term notes payable 47,000 Notes receivable (long-term) 1,000 Common stock 10,000 Equipment 50,000 Additional paid-in capital 80,000 Factory building 90,000 Retained earnings 31,000 Intangibles 5,000 During the year 2015, the company had the following summarized activities: a. Purchased short-term investments for $10,000 cash. b. Lent $5,000 to a supplier who signed a two-year note. c. Purchased equipment that cost $18,000; paid $5,000 cash and signed a one-year note for the balance. d. Hired a new president at the end of the year. The contract was for $85,000 per year plus options to purchase company stock at a set price based on company performance. e. Issued an additional 2,000 shares of $0.50 par value common stock for $11,000 cash. f. Borrowed $9,000 cash from a local bank, payable in three months. g. Purchased a patent (an intangible asset) for $3,000 cash. h. Built an addition to the factory for $24,000; paid $8,000 in cash and signed a three-year note for the balance. i. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000. Required: 1. & 2. Record each necessary entry for the events in 2015 in T-accounts (including referencing) and determine the ending balances. The balances at the end of 2014 have been entered as beginning balances for 2015. (Transaction (a) has been completed in the T-accounts as an example.)
Explanation / Answer
Answer 1. Cash Accounts Payable Beg. Bal. 22,000 10,000 a. Beg. Bal. 15,000 e. 11,000 5,000 b. f 9,000 5,000 c i 1,000 3,000 g. 8,000 h. End. Bal. 12,000 End. Bal. 15,000 Investment (Short Term) Accrued Liabilities Payable Beg. Bal. 3,000 Beg. Bal. 4,000 a 10,000 End. Bal. 13,000 End. Bal. 4,000 Accounts Receivables Notes Payable (Short Term) Beg. Bal. 3,000 Beg. Bal. 7,000 13,000 c 9,000 f End. Bal. 3,000 End. Bal. 29,000 Inventory Long term Notes Payable Beg. Bal. 20,000 Beg. Bal. 47,000 16,000 g End. Bal. 20,000 End. Bal. 63,000 Notes Receivables (Long term) Common Stock Beg. Bal. 1,000 Beg. Bal. 10,000 b. 5,000 1,000 e End. Bal. 6,000 End. Bal. 11,000 Equipment Additional Paid-in Capital Beg. Bal. 50,000 1,000 i. Beg. Bal. 80,000 c. 18,000 10,000 e. End. Bal. 67,000 End. Bal. 90,000 Factory Building Retained Earnings Beg. Bal. 90,000 Beg. Bal. 31000 g. 24,000 End. Bal. 114,000 End. Bal. 31,000 Intangibles Beg. Bal. 5000 g. 3000 End. Bal. 8,000 Answer 2. Cougar Plastics Company Trail Balance As on Dec 31, 2014 Dr. Amt. Cr. Amt. Cash 12,000 Accounts Payable 15,000 Investment (Short Term) 13,000 Accrued Liabilities Payable 4,000 Accounts Receivables 3,000 Notes Payable (Short Term) 29,000 Inventory 20,000 Long term Notes Payable 63,000 Notes Receivables (Long term) 6,000 Common Stock 11,000 Equipment 67,000 Additional Paid-in Capital 90,000 Factory Building 114,000 Retained Earnings 31,000 Intangibles 8,000 Total 243,000 243,000 Answer 3. Cougar Plastics Company Balance Sheet As on dec 31, 2014 Assets Current Assets Cash 12,000 Investment (Short Term) 13,000 Accounts Receivables 3,000 Inventory 20,000 48,000 Non-Current Assets Notes Receivables (Long term) 6,000 Equipment 67,000 Factory Building 114,000 Intangibles 8,000 195,000 Total Assets 243,000 Liabilities & Shareholders' Equity Current Liabilities Accounts Payable 15,000 Accrued Liabilities Payable 4,000 Notes Payable (Short Term) 29,000 48,000 Other Liabilities Long term Notes Payable 63,000 Total Liabilties 111,000 Shareholders' Equity Common Stock 11,000 Additional Paid-in Capital 90,000 Retained Earnings 31,000 Total shareholders' Equity 132,000 Total liabilities & Shareholders' Equity 243,000 Answer 4. Current Ratio = Current Assets / Current Liabilities Current Ratio = 48000 / 48000 = 1 : 1
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