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Recording transactions - Determining Financial Statement Effects of Various Transactions

CP2-1 Determining Financial Statement Effects of Various Transactions

Lester's Home Healthcare Services (LHHS) was organized on January 1, 2005, by four friends. Each organizer invested $10,000 in the company and, in turn, was issued 8,000 shares of stock. To date, they are the only stockholders. During the first month (January 2005), the company had the following six events:

a. Collected a total of $40,000 from the organizers and, in turn, issued the shares of stock.

b. Purchased a building for $65,000, equipment for $16,000, and three acres of land for $12,000; paid $13,000 in cash and signed a note for the balance, which is due to be paid in 15 years.

c. One stockholder reported to the company that 500 shares of his Lester's stock had been sold and transferred to another stockholder for $5,000 cash.

d. Purchased supplies for $3,000 cash.

e. Sold one acre of land for $4,000 cash to another company.

f. Lent one of the shareholders $5,000 for moving costs, receiving a signed six-month note from the shareholder.

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CP2-1 Determining Financial Statement Effects of Various Transactions

Lester's Home Healthcare Services (LHHS) was organized on January 1, 2005, by four friends. Each organizer invested $10,000 in the company and, in turn, was issued 8,000 shares of stock. To date, they are the only stockholders. During the first month (January 2005), the company had the following six events:

a. Collected a total of $40,000 from the organizers and, in turn, issued the shares of stock.

b. Purchased a building for $65,000, equipment for $16,000, and three acres of land for $12,000; paid $13,000 in cash and signed a note for the balance, which is due to be paid in 15 years.

c. One stockholder reported to the company that 500 shares of his Lester's stock had been sold and transferred to another stockholder for $5,000 cash.

d. Purchased supplies for $3,000 cash.

e. Sold one acre of land ...

Solution Summary

The solution explains how to record the given transactions in relation to the accounting equation.

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