Question

E2-10 Analyzing the Effects of Transactions in T-Accounts LO2-4 Precision Builders Construction Company was incorporated by Chris Stoschek. The following activities occurred during the year: Received from three investors $58,000 cash and land valued at $33,000; each investor was issued 1,000 shares of common stock with a par value of $0.10 per share. Purchased construction equipment for use in the business at a cost of $53,000; one-fourth was paid in cash and the company signed a note for the balance (due in six months). Lent $3,000 to one of the investors who signed a note due in six months. Chris Stoschek purchased a truck for personal use; paid $6,900 down and signed a one-year note for $31,500. Paid $21,500 on the note for the construction equipment in (b) (ignore interest). Required: 1. Create T-accounts for the following accounts: Cash, Notes Receivable, Equipment, Land, Notes Payable, Common Stock, and Additional Paid-in Capital. Beginning balances are $0. For each of the preceding transactions, record the effects of the transaction in the appropriate T-accounts. Include good referencing for each T-account.

Answer 1

	PRECISION BUILDERS CONSTRUCTION COMPANY
		Cash Account
	Particulars	Debit($)	Particulars	Credit($)
	To Investors(paid in Capital)	58000	By Equipment	13250
	($58000 in total from 3 partners)		By Investors(paid in capital)	3000
			By Notes Payable	21500
			By Balance C/d	20250
		58000		58000
		Notes Receivable Account
	Particulars	Debit($)	Particulars	Credit($)
	To Investors(paid in Capital)	3000	By Balance C/d	3000
		3000		3000
		Equipment Account
	Particulars	Debit($)	Particulars	Credit($)
	To Cash	13250	By Balance C/d	53000
	To Notes payable(6 Months)	39750
		53000		53000
		Land Account
	Particulars	Debit($)	Particulars	Credit($)
	To Investors(paid in Capital)	33000	By Balance C/d	33000
		33000		33000
		Notes Payable Account
	Particulars	Debit($)	Particulars	Credit($)
	To Cash	21500	By Equipment	39750
	To Balance C/d	18250
		39750		39750
		Common Stock Account
	Particulars	Debit($)	Particulars	Credit($)
	To Balance C/d	300	By Investors(paid in capital)	300
			(1000shares*0.10*3)
		300		300
		Additional Paid in capital Account
	Particulars	Debit($)	Particulars	Credit($)
	To Common Stock	300	By Cash	58000
	(1000shares*0.10*3)		By Land	33000
	To Cash	3000	By Notes Receivable	3000
	To Balance C/d	90700
		94000		94000
Note	1. Depreciation is ignored since no depreciation rate is given on Equipment A/c
	2. Chris Stoschek purchased truck, business accounts will not be affected due to this transaction since it is purchased for his personal purpose
	3.Entries for recording loan given to partner
	a) For giving loan
	Investor A/c   Dr	3000
	To Cash		3000
	b) For Receiving Notes Receivable
	Notes Receivable A/c Dr	3000
	To Investor A/c		3000