Lex Systems Inc. is a computer software company that makes online public access cata- loguing systems for library, business, or home use. It also has a small service department that provides initial data inputting for a fee. The company has been in business for ten years. At the end of the most recent year, 2013, the accounting records reflected total assets of $100,000 and total liabilities of $25,000. During the current year, 2014, the following summarized events occurred:

a. Repaid $5,000 cash on a bank note borrowed in a previous year.

b. Bought a computer from a shareholder for $2,000; signed a one-year note for the liability.

c. Disposed of a printer that was obsolete (net book value of zero) by turning it in to a salvage centre. No proceeds from the disposal.

d. Purchased office equipment for $1,000; paid cash.

e. Paid a $500 cash dividend to the shareholders.

f. Made a $10,000 down payment on a $50,000 building; signed a four-year note for the remainder.

g. A shareholder sold $5,000 worth of his shares in Lex Systems Inc. to the company at cost.

Required:

1. Complete the spreadsheet that follows, using plus (+) for increases and minus (−) for decreases for each account. The first transaction is used as an example.

2. Did you include event (c) in the spreadsheet? Why or why not?
3. Based on beginning balances plus the completed spreadsheet, provide the following amounts (show computations): a. Total assets at the end of the year.
b. Total liabilities at the end of the year. c. Total shareholders' equity at the end of the year.
4. As of December 31, 2014, has the financing for Lex Systems Inc.'s investment in assets primarily come from liabilities or from shareholders' equity?

Transcribed Image Text:

= Liabilities + Shareholders' Equity Contributed Retained Earnings Assets Notes %3D Cash Equipment Building Payable Capital (a) -5,000 -5,000