Question

Singh Company started business on January 1, 2016. The following transactions occurred in 2016:
1. On January 1, the company issued 10,000 common shares for $250,000.
2. On January 2, the company borrowed $50,000 from the bank.
3. On January 3, the company purchased land and a building for a total of $200,000 cash. The land was recently appraised at a fair market value of $60,000.
4. Inventory costing $130,000 was purchased on account.
5. Sales to customers totalled $205,000. Of these, $175,000 were sales on account.
6. The cost of the inventory that was sold to customers in transaction 5 was $120,000.
7. Payments to suppliers on account totalled $115,000.
8. Collections from customers on account totalled $155,000.
9. Payments to employees for wages were $55,000. In addition, there was $2,000 of unpaid wages at year end.
10. The interest on the bank loan was recognized and paid for the year. The interest rate on the loan was 6%.
11. The building was estimated to have a useful life of 30 years and a residual value of $20,000. The company uses the straight-line method of depreciation.
12. The company declared dividends of $7,000 on December 15, 2016, to be paid on January 15, 2017.
Required:
a. Analyze the effects of each of the transactions on the basic accounting equation, using a table like the one in Exhibit 2-3.
In Exhibit 2-3
b. Prepare a statement of income, a statement of changes in equity, a statement of financial position (unclassified), and a statement of cash flows for 2016.


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  • CreatedJune 11, 2015
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