Lesters Home Healthcare services was organizaed on Jan 1, 2005by four friends, E

Question

Lesters Home Healthcare services was organizaed on Jan 1, 2005by four friends, Each organizer invested $10,000 in the company andwas issued 8,000 shares to stock. During the first month thecomapny had the following six events: 1. Collected a total $40,000 from the organizers, and in turnissued the shares of stock. 2. Purchased a building for $65,000, equipment for $16,000,three acres of land for $12,000, paid $13,000 in cash and a signednote for the balance, due to be paid in 15 years. 3. One stockholder reported to the company that 500 shares hadbeen sold and transferred to another stock holder for $5,000cash 4. Purchased supplies $3,000 5. Sold one acre of land $4,000 cash to another company 6. Lent one of the shareholders $5,000 for moving costs,recieving a six month note Answer the following: 1.Was Lesters Home Healthcare services organized as apartnership or corp? 2.To develop a quick assestment, you decided to complete thespreadsheet that follows to use + for increases and - fordecreases. ex.                                  Assests                                =Liabilities           +StockholdersEquity cash  Supplies  Notesrecievable  land  building  equip  =   Notespayable Cont capital   Retain earnings a)+40,000                                                                  =                              +40,000 3.Did you include the transaction between the twostockholders-event 3-in the spreadsheet? why? 4.Based on the completed spreadsheet, provide : a) total assets at the end of the month b) total liabilities at the end of the month c) Total stockholders equity at the end of the month d) cash balance at the end of the month e)Total current assets at the end of the month Lesters Home Healthcare services was organizaed on Jan 1, 2005by four friends, Each organizer invested $10,000 in the company andwas issued 8,000 shares to stock. During the first month thecomapny had the following six events: 1. Collected a total $40,000 from the organizers, and in turnissued the shares of stock. 2. Purchased a building for $65,000, equipment for $16,000,three acres of land for $12,000, paid $13,000 in cash and a signednote for the balance, due to be paid in 15 years. 3. One stockholder reported to the company that 500 shares hadbeen sold and transferred to another stock holder for $5,000cash 4. Purchased supplies $3,000 5. Sold one acre of land $4,000 cash to another company 6. Lent one of the shareholders $5,000 for moving costs,recieving a six month note Answer the following: 1.Was Lesters Home Healthcare services organized as apartnership or corp? 2.To develop a quick assestment, you decided to complete thespreadsheet that follows to use + for increases and - fordecreases. ex.                                  Assests                                =Liabilities           +StockholdersEquity cash  Supplies  Notesrecievable  land  building  equip  =   Notespayable Cont capital   Retain earnings a)+40,000                                                                  =                              +40,000 3.Did you include the transaction between the twostockholders-event 3-in the spreadsheet? why? 4.Based on the completed spreadsheet, provide : a) total assets at the end of the month b) total liabilities at the end of the month c) Total stockholders equity at the end of the month d) cash balance at the end of the month e)Total current assets at the end of the month

Explanation / Answer

Assets Liabilities Stockholders' Equity 1 Cash 40,000.00 Contributed Capital 40,000.00 Retained Earnings 2 Land 12,000.00 Notes Payable 80,000.00 Building 65,000.00 Equipment 16,000.00 Cash (13,000.00) 3 No effect 4 Supplies 3,000.00 Cash (3,000.00) 4 Cash 4,000.00 Land (4,000.00) Cash (5,000.00) Note Receivable 5,000.00 3 The transaction in 3 is just between twostockholders . It does not affect the elements of accountingequation . Hence it is not included . a Total Assets 120,000.00 b Total Liabilities 80,000.00 c Total Stockholders' Equity 40,000.00 d Cash Balance 23,000.00 e Current Assets 31,000.00

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