P2-3 Recording Transactions in T-Accounts, Preparing the Balance Sheet, and Eval

ID: 2371321 • Letter: P

Question

P2-3 Recording Transactions in T-Accounts, Preparing the Balance Sheet, and Evaluating the Current Ratio LO2, 4, 5

Cougar Plastics Company has been operating for three years. At December 31, 2011, the accounting records reflected the following:

During the year 2012, the company had the following summarized activities:

Purchased equipment that cost $25,000; paid $5,100 cash and signed a one-year note for the balance.

Hired a new president at the end of the year. The contract was for $82,000 per year plus options to purchase company stock at a set price based on company performance.

Purchased a patent (an intangible asset) for $1,700 cash.

Built an addition to the factory for $21,000; paid $7,400 in cash and signed a three-year note for the balance.

Returned defective equipment to the manufacturer, receiving a cash refund of $3,500.

Cougar Plastics Company has been operating for three years. At December 31, 2011, the accounting records reflected the following:

Explanation / Answer

THE GIVEN TABLE MIGHT HELP YOU TO PREPARE ACCOUNTING RECORD...

Summary of Typical Business Activities by Statement of Cash Flow Section

Cash Receipts

Cash Payments

Operating Activities

Collections from credit customers

Wages and salaries paid to employees

Cash sales to customers

Payments to suppliers

Interest from notes receivable, investments, or bank accounts

Payments for operating expenses, including donations

Dividends received from investments in other companies

Payments for interest

Tax refunds received

Payments for taxes

Investing Activities

Proceeds from sale of land, building, or equipment

Purchase of land, or equipment

Proceeds from sale of debt or equity securities of another company

Purchase of debt or equity securities of another company

Proceeds from sale of intangible assets

Purchase of intangible assets

Principal repayments by employees and directors of loans may by company

Payments to loan money to non-customers

Financing Activities

Borrowed money

Repayments of loans and notes

Proceeds from sale of company's own stock

Repurchase of company's stock

Payment of dividends