X Company was formed on July 1, 2014, and had the following transactions during

Question

X Company was formed on July 1, 2014, and had the following transactions during the rest of 2014:

received $8,197 in cash contributions from the owners

purchased $8,924 worth of merchandise, all on account

sold merchandise that cost $6,745 for $11,242, all on account

paid $3,540 to suppliers for merchandise purchased on account

received $3,380 from customers for merchandise sold on account

paid $5,444 for land and equipment

borrowed cash from the bank in the amount of $4,999

What were total assets on December 31, 2014 (ignore depreciation on the equipment and interest on the loan)?

Explanation / Answer

Prepare balance with transactions:

Therefore, the total assets are $23,077.

Liabilities Amount ($) Assets Amount ($) Capital 8,197 Cash ($8,197 - $3,540 + $3,380 - $5,444 + $4,999) 7,592 Accounts payable ($8,924 - $3,540) 5,384 Merchandise inventory ($8,924 - $6,745) 2,179 Profit on sale merchandise inventory ($11,242 - $6,745) 4,497 Accounts receivable ($11,242 - $3,380) 7,862 Bank loan 4,999 Land and equipment 5,444 Total liabilities and capital 23,077 Total assets 23,077

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