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 liabilities 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:

Statement showing total liablities to be reported

Transaction	Increase or decrease in liablity
	Share capital	Bank's Loan	Accounts Payble	Advance Received from customer	Total
Sale of stock	$100,000				$100,000
Borrowing from bank		$200,000			$200,000
Purchase of equipment			$30,000		$30,000
Advance Received from customer				$80,000	$80,000
Service Performed against advance				($24,000)	($24,000)
Total Liablities to be reported	$100,000	$200,000	$30,000	$59,000	$389,000

1.No. of month from Oct to Dec=3

Advance received for 10 month

Service Performed against advance=($80,000/10)*3

=$24,000