Bearings & Brakes Corporation (B&B) was incorporated as a private company. The c

Question

Bearings & Brakes Corporation (B&B) was incorporated as a private company. The company’s accounts included the following at June 30:

  

  

1. Analyze transactions (a)–(e) to determine their effects on the accounting equation.

2. Record the transaction effects determined in part 1 using a journal entry format.

3. Summarize the journal entry effects from part 2 using T-accounts.

4. Prepare a trial balance at July 31.

5. Prepare a classified balance sheet at July 31.

Bearings & Brakes Corporation (B&B) was incorporated as a private company. The company’s accounts included the following at June 30:

Explanation / Answer

Part 1

1) increase in common stock by $320000

2) Increase in cash by $320000

1) Increase in borrowings by $75000

2) increase in cash by $75000

bought building and paid amount in cash and remaining amount by note

Note payable are long term since maturity period is more than 1 year

1) Increase in Fixed assets(building) by $172000

2) decrease in cash by $69000

3) Increase in note payable(long term) by $103000

1) Increase in fixed assets(equipment) by $93000

2) Decrease in cash by $93000

1) Increase in supplies by $93000

2) Increase in Accounts payable by $93000

Part 2

cash a/c Dr.

To Common stock a/c Cr.

Cash a/c Dr.

To Bank loan a/c. Cr.

Building a/c Dr.

To Note payable a/c.($169000)

To Cash a/c. Cr. ($69000)

$172000

$103000

$69000

Equipment a/c Dr.

To Cash a/c

Supplies a/c

To account payable

Part 3

Common stock

Cash

Bank loan

Building a/c

Note payable

Equipment

Accounts payable

Supplies

Part 4 Trial balance

Part 5 - classified Balance sheet

Serial no. Transaction Effect 1 issue of share capital

1) increase in common stock by $320000

2) Increase in cash by $320000

2 Borrowed from bank which is payable in 4 years

1) Increase in borrowings by $75000

2) increase in cash by $75000

3

bought building and paid amount in cash and remaining amount by note

Note payable are long term since maturity period is more than 1 year

1) Increase in Fixed assets(building) by $172000

2) decrease in cash by $69000

3) Increase in note payable(long term) by $103000

4 equipment purchased on cash

1) Increase in fixed assets(equipment) by $93000

2) Decrease in cash by $93000

5 supplies purchased on account

1) Increase in supplies by $93000

2) Increase in Accounts payable by $93000

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