Question

East Hill Home Healthcare Services was organized by four friends who each invested $15,000 in the company and, in turn, was issued 8,200 shares of $1.00 par value stock. To date, they are the only stockholders. At the end of last year, the accounting records reflected total assets of $732,000 ($55,000 cash; $518,000 land; $53,000 equipment; and $106,000 buildings), total liabilities of $224,000 (short-term notes payable of $118,000 and long-term notes payable of $106,000), and stockholders’ equity of $508,000 ($22,000 of common stock, $87,000 of additional paid-in capital, and $399,000 retained earnings). During the current year, the following summarized events occurred:

Sold 10,100 additional shares of stock to the original organizers for a total of $107,000 cash.

Purchased a building for $52,000, equipment for $15,000, and four acres of land for $21,000; paid $11,000 in cash and signed a note for the balance (due in 15 years). (Hint: Five different accounts are affected.)

Sold one acre of land acquired in (b) for $5,250 cash to another company.

Purchased short-term investments for $12,000 cash.

One stockholder reported to the company that 360 shares of his East Hill stock had been sold and transferred to another stockholder for $3,100 cash.

Lent one of the shareholders $5,100 for moving costs, receiving a signed six-month note from the shareholder.

Required:

1. Was East Hill Home Healthcare Services organized as a sole proprietorship, a partnership, or a corporation?

	Sole proprietorship
	Partnership
	Corporation

2. During the current year, 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 East Hill Home Healthcare Services, you have decided to complete the tabulation that follows and to use plus (+) for increases and minus (−) for decreases for each account. The first event is used as an example.

4. Based only on the completed tabulation, provide the following amounts:

5. Compute the current ratio for the current year.

Answer 1