Granger Service Company, Inc., was organized by Ted Granger and five other investors. The following activities occurred during the year:
a. Received $70,000 cash from the investors; each was issued 8,400 shares of capital stock with a par value of $0.10 per share.
b. Purchased equipment for use in the business at a cost of $18,000; one-fourth was paid in cash and the company signed a note for the balance (due in six months).
c. Signed an agreement with a cleaning service to pay $120 per week for cleaning the corporate offices next year.
d. Received an additional contribution from investors who provided $3,000 in cash and land valued at $15,000 in exchange for 1,000 shares of stock in the company.
e. Lent $2,500 to one of the investors who signed a note due in six months.
f. Ted Granger borrowed $7,000 for personal use from a local bank, signing a one-year note.
1. Create T-accounts for the following accounts: Cash, Notes Receivable, Equipment, Land, Notes Payable, Common Stock, and Additional Paid-in Capital. Beginning balances are $0. For each of the preceding transactions, record the effects of the transaction in the appropriate T-accounts. Include good referencing and totals for each T-account.
2. Using the balances in the T-accounts, fill in the following amounts for the accounting equation:
Assets $________ = Liabilities $________ + Stockholders’ Equity $________
3. Explain your response to events (c) and (f).