Practice Solutions Accounting

Q1. Show the effect of each of the seven listed transactions on the balance sheet items of Carpet Center Plus. Indicate the new balances after the transaction of May 2 and each subsequent transaction. The effects of the May 1 transaction are already filled in to provide you with an example. May | 1 | Issued capital stock for $75,000. | | 2 | Purchased a small office building at a price of $58,000 for the land and $65,000 for the building. Paid $43,000 cash and signed a note payable for the balance. | | 8 | Borrowed $15,000 from the bank. Signed a 60-day note payable for this amount. | | 16 | Purchased copying machines, computers, and other office equipment for $19,000. Paid $9,000 cash and signed a note payable for the balance. | | 28 | Sold an item of office equipment (computer) to a stockholder at its cost of $2,800. The stockholder paid $800 cash and promised to pay the balance within 30 days. | | 30 | Paid $5,000 on the liability for the office equipment. | | 31 | Collected $500 from the stockholder who had bought the computer. | Answer:

| | Assets | = | Liabilities | + | Owners’ Equity | | | Cash | + | Accounts Receivable | + | Land | + | Buildings | + | Office Equipment | = | Notes Payable | + | Capital stock | May 1 | | +$75, 000 | | | | | | | | | | | | +$75,000 | 2 | | -43,000 | | | | +$58,000 | |