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    Accounting equation; calculate total assets, liabilities and equity

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    Swish Watch Corporation manufactures, sells, and services expensive, ugly watches. The company has been in business for three years. At the end of the most recent year, 2006, the accounting records reported total assets of $2,255,000 and total liabilities of $1,780, 000. During the current year, 2007, the following summarized events occurred:

    a. Issued additional shares of stock for $109,000 cash.
    b. Borrowed $186,000 cash from the bank and signed a 10-year note.
    c. Built an addition on the factory for $200,000 and paid cash to the construction company.
    d. Purchased equipment for the new addition for $44,000, pay $12,000 in cash and signing a six-month note for the balance.
    e. Returned a $4,000 piece of equipment, from e, because it proved to be defective; received a cash refund.
    f. At the end of 2006, lent $2,000 cash to the company president, LaGuardia Acey, who signed a note with terms requiring repayment of the loan in one year.


    1. Complete the spreadsheet that follows, using plus (+) for increases and minus (-) for decreases for each account. The first transaction is used as an example.

    Assets = Liabilities + Stockholders' Equity

    Notes Receivable


    Building Notes Payable
    Contributed Capital
    Retained Earnings
    (a) +109,000 = +109,000

    2. Based on the beginning balances plus the completed spreadsheet, provide the following amounts (show computations):
    a. Total assets at the end of the year.
    b. Total liabilities at the end of the year.
    c. Total stockholders' equity at the end of the year.
    3. As of December 31, 2007 has the financing for Swish Watch Corporation's investment in assets primarily come from liabilities of stockholders' equity?

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    Solution Summary

    The expert calculates total assets, liabilities and equity for Swish Watch Corporation.