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# Basic Accounting Equation Calculations

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Company Background:

Smiths Incorporated makes model cars to sell to toy stores & has a repair dept to repair clients cars for a fee & in business for 5 yrs. At the end of 2005, the accting records reflect total assets of \$500,000 and total liabilities of \$200,000. During the current year, 2006 the following events took place.

a) issued additional shares of stock for \$100,000 cash
b) borrowed \$120,000 cash from bank & signed 10year note
c) built addition on the factory for \$200,000 & paid cash to contractor
d) purchased new equipment for the new addition for \$30,000, paying \$3000 in cash & signed a note due in 6 months for balance
e) returned \$3000 piece of equipment, from d, and received a reduction of the note payable
f) purchased a delivery truck (equipment) for \$10,000, paid \$5000 cash & signed a 9 month note for remainder
h) stockholder sold \$5000 of his capital stock in Smith's to his neighbor

Questions:

1) Can you help me place above items in basic accounting spreadsheet?

Assets = Liabilities + Stockholder
Cash / notes / equipment / bldg = notes / contributed + retained earnings
receivable payable capt

(Cash shows starting balance at \$100,000 and Contributed capital at \$100,000)

2) Do I include the event listed in h on the spreadsheet or do I leave the event off the spreadsheet?

3) Based on beginning balances plus the completed spreadsheet, what would be the following amounts?

*Total assets a the end of the year?
*Total liabilities at the end of the year?
*Total stockholders equity at the end of the year?

4) As of Dec 31, 2006 fas the financing for Smiths investment in assets primarly come from liabilities or stockholder equity?

#### Solution Preview

For your convenience, I have attached a formatted MS Excel spreadsheet containing the text below. Feel free to contact me in the future in the event that additional assisatance is required.

1) Can you help me place above items in basic accting spreadsheet?

A) Issued additional shares of stock for \$100,000 cash
B) Borrowed \$120,000 cash from bank & signed 10-year note
C) Built addition on the factory for \$200,000 & paid cash to contractor
D) Purchased new equipment for the new addition for \$30,000, paying \$3000 in cash & signed a note due in 6 months for balance
E) Returned \$3000 piece of equipment, from d, and received a reduction of the note payable
F) Purchased a delivery truck (equipment) for \$10,000, paid \$5000 cash & signed a 9 month note for ...

#### Solution Summary

This file contains a formatted MS Excel spreadsheet, which highlights the use if the basic accounting equation to determine year-end totals.

\$2.19