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Practice Solutions

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Submitted By roxanaemilia68
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Q1. Show the effect of each of the seven listed transactions on the balance sheet items of Carpet Center Plus. Indicate the new balances after the transaction of May 2 and each subsequent transaction. The effects of the May 1 transaction are already filled in to provide you with an example. May | 1 | Issued capital stock for $75,000. | | 2 | Purchased a small office building at a price of $58,000 for the land and $65,000 for the building. Paid $43,000 cash and signed a note payable for the balance. | | 8 | Borrowed $15,000 from the bank. Signed a 60-day note payable for this amount. | | 16 | Purchased copying machines, computers, and other office equipment for $19,000. Paid $9,000 cash and signed a note payable for the balance. | | 28 | Sold an item of office equipment (computer) to a stockholder at its cost of $2,800. The stockholder paid $800 cash and promised to pay the balance within 30 days. | | 30 | Paid $5,000 on the liability for the office equipment. | | 31 | Collected $500 from the stockholder who had bought the computer. | Answer:

| | Assets | = | Liabilities | + | Owners’ Equity | | | Cash | + | Accounts Receivable | + | Land | + | Buildings | + | Office Equipment | = | Notes Payable | + | Capital stock | May 1 | | +$75, 000 | | | | | | | | | | | | +$75,000 | 2 | |

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