Presented below are the balance sheet accounts of the Mayfair Company as of December 1, 2017. The accounts are listed in random order.

During the month of December 2017, the following events occurred:
1. Purchased inventory on credit that cost \($3,000\).
2. Issued common stock at par value in exchange for machinery and equipment valued at \($12,000.\)
3. The building was appraised at a value of \($45,000\) by a certified real estate appraiser.

4. The note receivable of \($2,000\) was collected.
5. \($8,000\) cash was paid on the outstanding accounts payable.
6. Purchased land valued at \($25,000\), paying \($3,000\) in cash and signing a five-year note for the remaining amount.

Required:

1. Prepare the balance sheet as of December 1, 2017, for the Mayfair Company.
2. Prepare a spreadsheet using the balance sheet equation as illustrated in this chapter for the December events.
3. Prepare the balance sheet as of December 31, 2017, for the Mayfair Company.
4. Evaluate the company’s financial leverage at year-end 2017.

Transcribed Image Text:

Machinery & equipment (net)...... $15,000 Accounts payable..... Note receivable Cash..... $10,000 10,000 Notes payable.. 9,500 2,000 Accounts receivable.. 15,000 Inventory.. 3,000 Long-term investments 8,000 Bank loan.. 10,500 Additional paid-in capital 76,000 Building (net).. 30,000 Land...... 40,000 Common stock ($1 par value) 5,000 Retained earnings 12,000