Faith's Fine Furniture Corporation and Faye's Fashions
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Inferring Investing and Financing Transactions and Preparing a Balance Sheet" .
E2-9 Inferring Investing and Financing Transactions and Preparing a Balance Sheet: L02, L04, L05
During its first week of operations, January 1-7, 2006, Faith's Fine Furniture Corporation completed six transactions with the dollar effects indicated in the following schedule:
Dollar Effect of Each of the Six Transactions
Accounts 1 2 3 4 5 6 Ending Balance
Cash $12,000 $50,000 $(4,000) $4,000 $(7,000)
Equipment 7,000
Land 12,000 $3,000
Long-term Debt 50,000 8,000 4,000 3,000
Contributed Capital 12,000
Required:
1. Write a brief explanation of transactions 1 through 6. Explain any assumptions that you made.
2. Compute the ending balance in each account and prepare a classified balance sheet for Faith's Fine Furniture Company on January 7, 2006.
3. As of January 7, 2006, has most of the financing for Faith's investment in assets come from liabilities or stockholders' equity?
E2-10 Inferring Investing and Financing Transactions and Preparing a Balance Sheet: L02, L04, L05
During its first month of operations, March 2006, Faye's Fashions,
Inc., completed four transactions with the dollar effects indicated in the following schedule:
Dollar Effect of Each of the Four Transactions
Accounts 1 2 3 4 Ending Balance
Cash $50,000 $(4,000) $5,000 $(4,000)
Computer Equipment 4,000
Delivery Truck 25,000
Long-term Notes Payable 21,000
Required:
1. Write a brief explanation of transactions 1 through 4
2. Explain any assumptions that you made.
3. Compute the ending balance in each account and prepare a classified balance sheet for Faye's Fashions, Inc., at the end of March 2006.
4. As of March 31, 2006, has most of the financing for Faye's investment in assets come from liabilities or stockholders' equity?
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Solution Summary
This solution is comprised of a detailed explanation to write a brief explanation of transactions 1 through 6, compute the ending balance in each account and prepare a classified balance sheet for Faith's Fine Furniture Company on January 7, 2006 and compute the ending balance in each account and prepare a classified balance sheet for Faye's Fashions, Inc., at the end of March 2006.
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E2-9 Inferring Investing and Financing Transactions and Preparing a Balance Sheet: L02, L04, L05
During its first week of operations, January 1-7, 2006, Faith's Fine Furniture Corporation completed six transactions with the dollar effects indicated in the following schedule:
Dollar Effect of Each of the Six Transactions
Accounts 1 2 3 4 5 6 Ending Balance
Cash $12,000 $50,000 $(4,000) $4,000 $(7,000)
Equipment 7,000
Land 12,000 $3,000
Long-term Debt 50,000 8,000 4,000 3,000
Contributed Capital 12,000
Required:
1. Write a brief explanation of transactions 1 through 6. Explain any assumptions that you made.
For transaction 1, this is the first day of operation. So, the shareholders of the Faith's Fine Furniture Corporation contribute 12,000 of cash. Therefore, we need to debit cash of $12,000 and credit $12,000 in stockholders' equity.
For transaction 2, the company borrows long-term debt. Therefore, we need to debit cash of $50,000 and credit long-term debt.
For transaction 3, the company purchases the land of $12,000, pays $4,000 in cash and the remaining of $8,000 is notes payable. So, we need to credit cash of $4,000, debit land for $12,000, and credit ...
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