Fruity Farms was incorporated as a private company on January 1, 2017. The company’s accounts included the following at January 31, 2017:
During the month of February, the company had the following activities:
a. Paid a to shareholders of $15,000
b. Repaid $10,000 cash to a local bank
c. Issued 500 shares for $50,000 cash
d. Purchased equipment for $30,000, paying $3,000 in cash and signing a note due in six months for the balance
e. Purchased supplies for $3,000 on account
Required:
1. Analyze transactions (a) through (e) to determine their effects on the accounting equation.
2. Record the transaction effects determined in requirement 1 using a journal entry format.
3. Summarize the journal entry effects from requirement 2 using T-accounts.
4. Prepare a classified at February 28, 2017.
5. As of February 28, 2017, has the financing for Fruity Farm’s investment in assets primarily come from liabilities or from shareholders’ equity?
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