Steve Limberg established The Swimmer's Cove, a sole proprietorship selling swimming apparel and equipment, in 2006. At December 31, 2011, the accounting records reflected total assets of $850,000 and total liabilities of $375,000. During the current year, 2012, the following summarized events occurred:

(a) Borrowed $10,000 cash from the local bank and signed a six-month note.

(b) Purchased a warehouse for $300,000 and a delivery van for $40,000; paid cash of $50,000 and signed a 20-year note for the rest.

(c) Ordered $150,000 in merchandise to be delivered in January 2013.

(d) Received an additional investment of $60,000 cash from owner Steve Limberg.

(e) Sold the delivery van to another business for $40,000; received $10,000 cash and the rest on a two-year note due from the other company.

(f) Purchased a short-term investment for $30,000 cash.

(g) Steve Limberg withdrew $25,000 cash from the business.

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 owner's equity at the end of the year.
4. As of December 31, 2012, has the financing for The Swimmer's Cove's assets primarily come from liabilities or owner's equity?

Transcribed Image Text:

Assets Liabilities Owner's Equity S. Limberg, S. Limberg, CapitalDrawing + Short-term Investment Receivable Equipment BuildingNotes Payable Notes Cash (a) +10,000 +10,000