Question about Recording transactions
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Mallard Incorporated (MI) is a small manufacturing company that makes model trains to sell to toy stores. It has a small service department that repairs customers' trains for a fee. The company has been in business for five years. At the end of the most recent year, 2005, the accounting records reflected total assets of $500,000 and total liabilities of $200,000. During the current year, 2006, the following summarized events occurred:
a. Issued additional shares of stock for $100,000 cash.
b. Borrowed $120,000 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 contractor.
d. Purchased equipment for the new addition for $30,000, paying $3,000 in cash and signing a note due in six months for the balance.
e. Returned a $3,000 piece of equipment, from d, because it proved to be defective; received a reduction of the note payable.
f. Purchased a delivery truck (equipment) for $10,000; paid $5,000 cash and signed a nine month note for the remainder.
g. At the end of 2006, lent $2,000 cash to the company president, Jennifer Mallard, who signed a note due in one year.
h. A stockholder sold $5,000 of his capital stock in Mallard Incorporated to his neighbor.
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Solution Summary
The solution explains how the record the given transactions in relation to the accounting equation
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PA2-1 Determining Financial Statement Effects of Various Transactions
Mallard Incorporated (MI) is a small manufacturing company that makes model trains to sell to toy stores. It has a small service department that repairs customers' trains for a fee. The company has been in business for five years. At the end of the most recent year, 2005, the accounting records reflected total assets of $500,000 and total liabilities of $200,000. During the current year, 2006, the following summarized events occurred:
a. Issued additional shares of stock for $100,000 cash.
b. Borrowed $120,000 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 contractor.
d. Purchased equipment for the new addition for $30,000, paying $3,000 in cash and ...
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