Lester’s Home Healthcare Services (LHHS) wasorganized on January 1, 2005, by fou

Question

Lester’s Home Healthcare Services (LHHS) wasorganized on January 1, 2005, by four friends. Each organizerinvested $10,000 in the company and, in turn, was issued 8,000shares of stock. To date, they are the only stockholders. Duringthe first month (January 2005), the company had the following sixevents:

a.   Collected a total of $40,000 from the organizers and, inturn, issued the shares of stock.

b. Purchased a building for $65,000,equipment for $16,000, and three acres of land for $12,000; paid$13,000 in cash and signed a note for the balance, which is due tobe paid in 15 years.

c. One stockholder reported to thecompany that 500 shares of his Lester’s stock had been soldand transferred to another stockholder for $5,000 cash.

d. Purchased supplies for $3,000cash.

e. Sold one acre of land for $4,000cash to another company.

Explanation / Answer

BalanceSheet

BalanceSheet

Assets Cash 23,000.00 Building 65,000.00 Equipment 16,000.00 Land 8,000.00 Supplies 3,000.00 Notes Receivable 5,000.00 TotalAssets 120,000.00 Liabilities Notes Payable 80,000.00 Stock Holders Equity 40,000.00 Total Liabilities &Stock holders' 120,000.00 Equity

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