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

Exercise 24

Recording Journal Entries and Preparing a Classified Balance Sheet
Assume Down.com was organized on May 1 to compete with Despair.com -a company that sells de-motivational posters and office products. The following events occurred during the first month of Down.com 's operations.
a. Received $60,000 cash from the investors who organized Down.com Corporation.
b. Borrowed $20,000 cash and signed a note due in two years.
c. Ordered equipment costing $16,000.
d. Purchased $9,000 in equipment, paying $2,000 in cash and signing a six-month note for the balance.
e. Received the equipment ordered in ( c ), paid for half of it, and put the rest on account.
Required:
1. Summarize the financial effects of items ( a )-( e ) in a table or spreadsheet similar to Exhibit 2.5.
2. Prepare journal entries for each transaction. Be sure to use referencing and categorize each account as an asset (A), liability (L), or stockholders' equity (SE). If a transaction does not require a journal entry, explain the reason.
3. Prepare a classified balance sheet at May 31. Include Retained Earnings with a balance of zero.