Singh Company started business on January 1, 2016. The following transactions occurred in 2016: 1. On January

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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