Smith Real Estate Co. experienced the following events during the organizing phase and its first month of operations. Some of


Smith Real Estate Co. experienced the following events during the organizing phase and its first month of operations. Some of the events were personal for the stockholders and did not affect the business. Others were transactions of the business.

Nov 4 John Smith, the major stockholder of real estate company, received $108,000 cash from an inheritance.

5 Smith deposited $59,000 cash in a new business bank account titled Smith Real Estate Co. The business issued common stock to Smith.

6 The business paid $500 cash for letterhead stationery for the new office.

7 The business purchased office equipment. The company paid cash of $12,000 and agreed to pay the account payable for the remainder, $8,500, within three months.

10 Smith sold DLD stock, which he owned for several years, receiving $74,000 cash from his stockbroker.

11 Smith deposited the $74,000 cash from sale of the DLD stock in his personal bank account.

12 A representative of a large company telephoned Smith and told him of the company’s intention to transfer $12,500 of business to Smith.

18 Smith finished a real estate deal for a client and submitted his bill for services, $3,000. Smith expects to collect from the client within two weeks.

21 The business paid half its account payable for the equipment purchased on November 7.

25 The business paid office rent of $500.

30 The business declared and paid a cash dividend of $1,700.


1. Classify each of the preceding events as one of the following:

a. A business-related event but not a transaction to be recorded by Smith Real Estate Co.

b. A business transaction for a stockholder, not to be recorded by Smith Real Estate Co.

c. A business transaction to be recorded by the Smith Real Estate Co.

2. Analyze the effects of the preceding events on the accounting equation of Smith Real Estate Co.

3. Record the transactions of the business in its journal. Include an explanation for each entry.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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Financial accounting

ISBN: 978-0136108863

8th Edition

Authors: Walter T. Harrison, Charles T. Horngren, William Bill Thomas

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Question Posted: December 10, 2012 03:27:27