Question

Accurate Builders construction company was incorporated by John Davis. Assume the following activities occurred during the year: a. Received from three investors $56,000 cash and land valued at $31,000; each investor was issued 1,500 shares of common stock with a par value of $0.10 per share. b. Purchased construction equipment for use in the business at a cost of $51,000; one-fourth was paid in cash and the company signed a note for the balance (due in six months). C. Lent $2,000 to one of the investors, who signed a note due in six months. d. John Davis purchased a truck for personal use; paid $6,700 down and signed a one-year note for $30,500. e. Paid $20,500 on the note for the construction equipment in (b) (ignore interest). Required: 1. For each of the preceding transactions, record the effects of the transaction in the appropriate T-accounts. 2. Using the balances in the T-accounts, fill in the following amounts for the accounting equation: 4. Compute the market value per share of the stock.

Answer 1

1. T- Accounts -

Notes Receivable $ 2,000 a b с Cash $ 56,000 $ 12,750 $ 2,000 $ 20,500 с e End Bal$ 20,750 End Bal$ 2,000 Equipment $ 51,000 Land $ 31,000 a End Bal$ 51,000 End Bal$ 31,000 Notes Payable $ 20,500 $ 38,250 Common Stock $ 150 e b a End Bal$ 17,750 End Bal$ 150 Additional Paid in Capital $ 86,850 a End Bal$ 86,850

2. Accounting Equation -

Accurate Builders Construction Company Accounting Equation Sr. No Cash + Notes Receivable + Land + Equipment Notes Payable + Common Stock + Additional Paid in Capital $ 86,850 $ 31,000 $ 150 a b $ 51,000 $ 38,250 с $ 56,000 $(12,750) $ (2,000) No Entry $(20,500) $ 2,000 d $ (20,500) $ 20,750 + $ 2,000 + $ 31,000 + $ 51,000 $ 17,750 + $ 150 + $ 86,850 $ 104,750 = $ 104,750

3. Market Value per Share -

Market Value Per Share 11 Issued Price Share Issued 11 $ 87,000 1,500 11 $ 58.00