Harrigan Service Company, Inc., was incorporated by Ian Harrigan and five other managers. The following activities occurred
Question:
Harrigan Service Company, Inc., was incorporated by Ian Harrigan and five other managers. The following activities occurred during the year:
a. Received $60,000 cash from the managers; each was issued 1,000 shares.
b. Purchased equipment for use in the business at a cost of $12,000; 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 it $120 per week for cleaning the corporate offices, beginning next week.
d. Ian Harrigan borrowed $10,000 for personal use from a local bank, signing a one-year note.
Required:
1. Create T-accounts for the following accounts: Cash, Equipment, Note Payable, and Contributed Capital. Beginning balances are zero. For each of the above transactions, record its effects in the appropriate T-accounts. Include 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 $$_____________+ Shareholders' Equity $$____________
3. Explain your response to events (c) and (d).
Step by Step Answer:
Fundamentals of Financial Accounting
ISBN: 978-1259103292
4th Canadian edition
Authors: Fred Phillips, Robert Libby, Patricia Libby, Brandy Mackintosh