Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 21

Recording Transactions (in a Journal and T-Accounts); Preparing a Trial Balance; Preparing and Interpreting the Balance Sheet
Athletic Performance Company (APC) was incorporated as a private company on June 1, 2013. The company's accounts included the following at July 1, 2013:

During the month of July, the company had the following activities:
a. Issued 2,000 shares of common stock for $200,000 cash.
b. Borrowed $30,000 cash from a local bank, payable in two years.
c. Bought a building for $141,000; paid $41,000 in cash and signed a three-year note for the balance.
d. Paid cash for equipment that cost $100,000.
e. Purchased supplies for $10,000 on account.
Required:
1. Analyze transactions ( a )-( e ) to determine their effects on the accounting equation. Use a spreadsheet format with a column for each account, enter the July 1, 2013 amounts in the first line under the account headings, and calculate ending balance.
TIP: You won't need new accounts to record the transactions described above, so have a quick look at the ones listed before you begin.
TIP: In transaction ( c ), three different accounts are affected.
2. Record the transaction effects determined in requirement 1 using journal entries.
3. Summarize the journal entry effects from requirement 2 using T-accounts.
TIP: Create a T-account for each account listed above. Enter the July 1, 2013, balances as the month's beginning balances.
4. Prepare a trial balance at July 31.
5. Prepare a classified balance sheet at July 31, 2013.
6. As of July 31, 2013, has the financing for APC's investment in assets primarily come from liabilities or stockholders' equity