Question

Use a single worksheet for each question. Set up the answer with the dates in columns and the income statement or balance sheet items in rows. On the balance sheet, the assets and liabilities should be in the same column. Use links between worksheets so the system works even if you change earlier numbers.

Assume you have started a new company on the first day of the year. You raise $100,000 from family and friends, and borrow $40,000 from the bank on a ten-year, 8% note, with 10% of the original principle due each year (on the morning of Dec. 31.) Your company sells only for cash, and holds no inventory. All labor and materials are paid for at delivery. Properly label all accounts.

1. Show the balance sheet for Jan. 1, 2002.

2. On Jan 2, 2002 you buy a machine for $75,000. It has a five-year life, and is depreciated straight-line. Show the balance sheet for Jan. 2, 2002.

Answer 1

Assuming that the date of starting the company is January 1st, 2002.

No transactions occurred during the year were given except the purchase of equipment

on Jenn on Jan 2 Assets 1. Non current Assts A: plant, properly Begipornest 2. Current Assets A cash "15poo , A 140 poo 6Spoo 140,000 1906) Total Assets Liobanties t. Equita 2. Non Current Ilability long form book leona 3. corrent liability Cersent postpons of long form ticho 26. Total habilities legala 36,00 looooo 1204 36,000 4000 T40,000 yooo 190,000 Scanned with CamScanner

Note :

1. There are no income statement transactions given in question

2. Only the required headings and accounts are mentioned in the balance sheet.

3. 10% of the long term liability is current portion of long term debt. i.e., 10% of 40,000 = 4,000 (as it is to be repaid within 12 months)

4. Instead of using "Long term bank loan", we can use "Long term Note payable from bank" account and similarly instead of "current portion of long term liability", we can use "current portion of long term note payable from bank"

(No interest accrual entry for one day on 8% note is accounted as January 2nd 2002 is not a year end date)