Question

Cash	$	80	Accounts Payable	$	26
Accounts Receivable		12	Wages and Other Expenses Payable		111
Inventories		188	Long-Term Debt		203
Other Current Assets		26	Other Long-Term Liabilities		44
Property, Plant, and Equipment		355	Contributed Capital		356
Other Assets		99	Retained Earnings		20

Assume that the following events occurred in the quarter ended December 31 (amounts provided are in whole dollars):

1. Paid $2,000,000 cash for an additional “other asset”.
2. Issued additional shares for $2,000,000 in cash.
3. Purchased property, plant, and equipment; paid $2,000,000 in cash and signed a note to pay the remaining $9,000,000 in two years.
4. Sold, at cost, other assets for $1,000,000 cash.
5. Conducted negotiations to purchase a sawmill, which is expected to cost $36,000,000.

transaction. asset =liabilities+shareowner's equity

a

b

c

d

e

2.

Record the transaction effects determined in requirement 1 using journal entries.

3.Summarize the journal entry effects from requirement 2 using T-accounts. Use the September 2017 ending balances as the beginning balances for the October to December 2017 quarter

4.Prepare a classified balance sheet at December 31, 2017

Answer 1

Requirement 1:

Accounting equation
	Assets	=	Liabilities	+	Stockholder's equity
a	($2,000,000)	=		+
	$2,000,000	=		+
b	$2,000,000	=		+	$2,000,000
c	($2,000,000)	=	$9,000,000	+
	$11,000,000	=		+
d	$1,000,000	=		+
	($1,000,000)	=		+
e		=		+
Total	$11,000,000	=	$9,000,000	+	$2,000,000

Requirement 2:

	Account title and Explanation	Debit	Credit
a	Other assets	$2,000,000
	Cash		$2,000,000
	[To record purchase of other assets for cash]
b	Cash	$2,000,000
	Contributed capital		$2,000,000
	[To record issuance of shares for cash]
c	Property,plant and equipment	$11,000,000
	Cash		$2,000,000
	Notes payable		$9,000,000
	[To record purchase of property,plant and equipment]
d	Cash	$1,000,000
	Other assets		$1,000,000
	[To record sale of other assets]
e	No entry

Requirement 3:

Cash
Beg. Bal.	$80,000,000
b	$2,000,000	a	$2,000,000
d	$1,000,000	c	$2,000,000
End. Bal.	$79,000,000
Accounts receivable
Beg. Bal.	$12,000,000
End. Bal.	$12,000,000
Inventories
Beg. Bal.	$188,000,000
End. Bal.	$188,000,000
Other current assets
Beg. Bal.	$26,000,000
End. Bal.	$26,000,000
Property,plant, and equipment
Beg. Bal.	$355,000,000
c	$11,000,000
End. Bal.	$366,000,000
Other assets
Beg. Bal.	$99,000,000
a	$2,000,000	d	$1,000,000
End. Bal.	$100,000,000
Accounts payable
		Beg. Bal.	$26,000,000
		End. Bal.	$26,000,000
Wages and other expenses payable
		Beg. Bal.	$111,000,000
		End. Bal.	$111,000,000
Long-term debt
		Beg. Bal.	$203,000,000
		c	$9,000,000
		End. Bal.	$212,000,000
Other long-term liabilities
		Beg. Bal.	$44,000,000
		End. Bal.	$44,000,000
Contributed capital
		Beg. Bal.	$356,000,000
		b	$2,000,000
		End. Bal.	$358,000,000
Retained earnings
		Beg. Bal.	$20,000,000
		End. Bal.	$20,000,000

Requirement 4:

Balance Sheet
At December 31,2017
Assets		Liabilities
Current assets:		Current liabilities:
Cash	$79,000,000	Accounts payable	$26,000,000
Accounts receivable	$12,000,000	Wages and other expenses payable	$111,000,000
Inventories	$188,000,000	Total current liabilities	$137,000,000
Other current assets	$26,000,000	Long-term debt:
Total current assets	$305,000,000	Long-term debt	$212,000,000
Property,plant, and equipment	$366,000,000	Other long-term liabilities	$44,000,000
Other assets	$100,000,000	Total long-term debt	$256,000,000
		Total liabilities	$393,000,000
		Stockholder's Equity:
		Contributed capital	$358,000,000
		Retained earnings	$20,000,000
		Total stockholder's equity	$378,000,000
Total assets	$771,000,000	total liabilities and stockholders' equity	$771,000,000