Question

Determining Balance Sheet Effects of Five Transaction

The following events occurred in TSL Company between June 1 and June 15, 2010:

a. Received $10,000 cash from owners and issued stock to them.

b. Borrowed $7,000 cash from a bank and signed a note.

c. Purchased land for $12,000; paid $1,000 in cash and signed a note for the balance.

d. Bought $300 of equipment on account.

e. Purchased $3,000 of equipment, paying $1,000 in cash and signing a note for the rest.

• For each of the events above, indicate the account, amount and direction of the effect (+ for increase o r – for decrease) on the accounting equation on the assignment spreadsheet in the dropbox. Check that the accounting equation remains in balance after each transaction.

• Create a TSL balance sheet as of June 15, 2010 using proper format.

Answer 1

Solution :

Event	Assets					=	Liabilities		+	Stockholder's Equity
	Cash	+	Land	+	Equipment	=	Note Payable	Accounts Payable		Common Stock	+	Retained Earnings
a	$10,000.00									$10,000.00
b	$7,000.00						$7,000.00
c	-$1,000.00		$12,000.00				$11,000.00
d					$300.00			$300.00
e	-$1,000.00				$3,000.00		$2,000.00
Total	$15,000.00		$12,000.00		$3,300.00		$20,000.00	$300.00		$10,000.00		$0.00

Balance Sheet - TSL
As on June 15, 2010
Liabilities	Amount	Assets	Amount
Stockholder's Equity:		Property, Plant & Equipment:
Common Stock	$10,000.00	Land	$12,000.00
		Equipment	$3,300.00
Liabilities:
Notes Payable	$20,000.00	Current Assets:
Accounts Payable	$300.00	Cash	$15,000.00
Total Liabilities and Equity	$30,300.00	Total Assets	$30,300.00