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CP2-1 Determining Financial Statement Effects of Various Transactions

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CP2-1 Determining Financial Statement Effects of Various Transactions;Lester's Home Healthcare Services (LHHS) was organized on January 1, 2005, by four friends.;Each organizer invested $10,000 in the company and, in turn, was issued 8,000 shares of stock. To;date, they are the only stockholders. During the first month (January 2005), the company had the;following six events;a. Collected a total of $40,000 from the organizers and, in turn, issued the shares of stock.;b. Purchased a building for $65,000, equipment for $16,000, and three acres of land for $12,000;paid $13,000 in cash and signed a note for the balance, which is due to be paid in 15 years.;c. One stockholder reported to the company that 500 shares of his Lester's stock had been sold;and transferred to another stockholder for $5,000 cash.;d. Purchased supplies for $3,000 cash.;e. Sold one acre of land for $4,000 cash to another company.;f. Lent one of the shareholders $5,000 for moving costs, receiving a signed six-month note from;the shareholder.;Required;1. Was Lester's Home Healthcare Services organized as a partnership or corporation? Explain;the basis for your answer.;2. During the first month, the records of the company were inadequate. You were asked to;prepare the summary of the preceding transactions. To develop a quick assessment of their;economic effects on Lester's Home Healthcare Services, you have decided to complete the;spreadsheet that follows and to use plus (_) for increases and minus (_) for decreases for;each account. The first transaction is used as an example.;Stockholders;Assets _ Liabilities _ Equity;Notes Notes Contributed Retained;Cash Supplies Receivable Land Building Equipment Payable Capital Earnings;(a) _ 40,000 _ _40,000;3. Did you include the transaction between the two stockholders-event c-in the spreadsheet?;Why?;4. Based only on the completed spreadsheet, provide the following amounts (show;computations);a. Total assets at the end of the month.;b. Total liabilities at the end of the month.;c. Total stockholders' equity at the end of the month.;e. Total current assets at the end of the month.;5. As of January 31, 2005, has the financing for LHHS's investment in assets primarily come;from liabilities or stockholders' equity?

 

Paper#25409 | Written in 18-Jul-2015

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