he following selected account balances were taken from ABC Company\'s general le
ID: 2502785 • Letter: H
Question
he following selected account balances were taken from ABC Company's general ledger at January 1, 2011
and December 31, 2011:
January 1, 2011 December 31, 2011
Accounts receivable 52,000 36,000
Cash 23,000 47,000 Inventory 31,000 18,000 Accounts payable 11,000 37,000
Equipment 123,000 144,000 Salaries payable 2,000 4,000 Investments 42,000 ? Land 91,000 31,000 Mortgage payable 111,000 60,000 Common stock 110,000 125,000 Retained earnings 32,000 37,000
Additional information for 2011 appears below:
1. ABC Company reported net cash inflows from operating activities of $60,000 and net cash outflows from
financing activities of $87,000 2. ABC Company sold land costing $60,000 and recorded an $8,000 loss on the sale 3. ABC Company purchased equipment for $21,000 cash 4. ABC Company purchased investments for $60,000 cash and sold investments and reported a $25,000 gain on
the sale
Calculate the balance in the investments account at December 3
Explanation / Answer
I suggest you set up T-accounts for each item and input the beginning and ending balance, leaving space in between for posting entries. Then journalize transactions 2, 3, and 4 and post them in the accounts. Some accounts will have holes that you have to fill to arrive at the ending balance, and filling that hope gives you information for more transactions. Eventually, you can find situations that result in the information in item 1.
This approach is very useful for finding out what happened and getting information that the problem does not provide directly. It's also an excellent learning process. It makes you think about what is taking place rather than just doing routine processes.
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