Model trains for sale to toy stores are produced by Whistle Stop Incorporated, a small manufacturing company. Whistle Stop also has a small service department that repairs customers' model trains for a fee. The company has been in business for five years. At the end of the most recent year, 2013, the accounting records reflected total assets of $500,000 and total liabilities of $200,000. During the current year, 2014, the following summarized events occurred:

a. Issued additional shares for $100,000 cash.

b. Borrowed $120,000 cash from the bank and signed a 10-year note.

c. Built an addition on the factory for $200,000 and paid cash to the contractor.

d. Purchased equipment for the new addition for $30,000, paying $3,000 in cash and signing a note due in six months for the balance.

e. Returned a $3,000 piece of equipment, from (d), because it proved to be defective;

received a reduction of the note payable.

f. Purchased a delivery truck (equipment) for $10,000; paid $5,000 cash and signed a nine-month note for the remainder.

g. A shareholder sold $5,000 worth of his shares in Whistle Stop Incorporated to his neighbour.

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 (g) 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 Whistle Stop's investment in assets pri- marily come from liabilities or shareholders' equity?

Transcribed Image Text:

Liabilities + Shareholders' Equity Assets Contributed Retained Notes Equipment Building Cash Payable Capital Earnings %3D (a) +100,000 +100,000