Question

ABC Company began operations on August 1, 2021 and entered
into the following transactions during 2021:

1.  On August 1, ABC Company sold common stock to owners in
    the amount of $100,000 and borrowed $200,000 from the
    local bank on a 10-month, 12% note payable.

2.  On September 1, ABC Company purchased a piece of equipment
    costing $80,000 by paying $50,000 in cash and agreeing to
    pay the remainder within six months. The equipment was
    assigned a 5-year life and a $5,000 residual value.

3.  On October 1, ABC Company received $80,000 cash from
    a customer for services to be performed over the next
    ten months.

4.  On November 1, ABC Company paid $18,000 cash for a one
    year insurance policy.

5.  On December 1, ABC Company paid $10,000 cash to its
    stockholders as a dividend.

Calculate the amount of total assets that ABC Company would
report in its December 31, 2021 balance sheet after all the
above transactions are recorded and all necessary adjusting
entries are made.

Answer 1

Solution:

Transactions	Increase in assets or (decrease) in assets
	Cash/Bank	Property,Plan&Equipment	Prepaid Insurance	Total
Sale of common stock	$100,000			$100,000
Borrowing from bank	$200,000			$200,000
Purcahse of equipment	($50,000)	$80,000		$30,000
Advance received from customer	$80,000			$80,000
Amount Paid for insurance policy	($18,000)		$18,000	$0
Payment of dividend	($10,000)			($10,000)
Depreciation		($5,000)		($5000)
Portion of Insurance expired			($3000)	($3000)
Total Asset to be reported	$302,000	$75,000	$15,000	$392,000

1.Depreciation for the year ended December 31,2021

=(Cost-residual value/Life of assest)*4/12

=[($80,000-$5000)/5]*4/12

=$5,000

2.Portion of Insurance expired=$18000*2/12=$3,000