Calculus II – Spring 2014
December 5, 2018
Management
December 5, 2018

P2-3 Recording Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the Current Ratio LO2-2, 2-4, 2-5

Cougar Plastics Company has been operating for three years. At December 31, 2014, the accounting records reflected the following:

Cash $ 22,000 Accounts payable $ 15,000
Investments (short-term) 3,000 Accrued liabilities payable 4,000
Accounts receivable 3,000 Notes payable (short-term) 7,000
Inventory 20,000 Long-term notes payable 47,000
Notes receivable (long-term) 1,000 Common stock 10,000
Equipment 50,000 Additional paid-in capital 80,000
Factory building 90,000 Retained earnings 31,000
Intangibles 5,000

During the year 2015, the company had the following summarized activities:

a. Purchased short-term investments for $10,000 cash.
b. Lent $5,000 to a supplier who signed a two-year note.
c. Purchased equipment that cost $18,000; paid $5,000 cash and signed a one-year note for the balance.
d. Hired a new president at the end of the year. The contract was for $85,000 per year plus options to purchase company stock at a set price based on company performance.
e. Issued an additional 2,000 shares of $0.50 par value common stock for $11,000 cash.
f. Borrowed $9,000 cash from a local bank, payable in three months.
g. Purchased a patent (an intangible asset) for $3,000 cash.
h. Built an addition to the factory for $24,000; paid $8,000 in cash and signed a three-year note for the balance.
i. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000.

Required:
1. & 2. Record each necessary entry for the events in 2015 in T-accounts (including referencing) and determine the ending balances. The balances at the end of
2014 have been entered as beginning balances for 2015.
(Transaction (a) has been completed in the T-accounts as an example.)

Cash Investments (short-term)
Beg. Bal. 22,000 Beg. Bal. 3,000
10,000 (a) (a) 10,000

3,000 (g) End. Bal.

End. Bal.

Accounts Receivable Inventory
Beg. Bal. 3,000 Beg. Bal. 20,000

End. Bal. End. Bal.

Notes Receivable (long-term) Equipment
Beg. Bal. 1,000 Beg. Bal. 50,000

End. Bal. End. Bal.

Factory Building Intangibles
Beg. Bal. 90,000 Beg. Bal. 5,000
(g) 3,000

End. Bal. End. Bal.

Accounts Payable Accrued Liabilities Payable
Beg. Bal. 15,000 Beg. Bal. 4,000

End. Bal. End. Bal.

Notes Payable (short-term) Long-Term Notes Payable
Beg. Bal. 7,000 Beg. Bal. 47,000

End. Bal. End. Bal.

Common Stock Additional Paid-in Capital
Beg. Bal. 10,000 Beg. Bal. 80,000

End. Bal. End. Bal.

Retained Earnings
Beg. Bal. 31,000

End. Bal.

Required:
4 Prepare a trial balance at December 31, 2015.

COUGAR PLASTICS COMPANY
Trial Balance
At December 31, 2015
Account Titles Debit Credit
Cash
Investments (short-term)
Accounts receivable
Inventory
Notes receivable (long-term)
Equipment
Factory building
Intangibles
Accounts payable
Accrued liabilities payable
Notes payable (short-term)
Notes payable (long-term)
Common stock
Additional paid-in capital
Retained earnings
Totals $243,000 $0

Required:
5 Prepare a classified balance sheet at December 31, 2015.

COUGAR PLASTICS COMPANY
Balance Sheet
At December 31, 2015
Assets Liabilities
Current assets: Current liabilities:

Total current liabilities –
Total current assets –
Non-current assets:
Total liabilities 0
Stockholders’ Equity

Total non-current assets – Total stockholders’ equity –
Total assets $ – Total liabilities and stockholders’ equity $ –

Required:
6 Compute the current ratio for 2015. (Round your answer to 2 decimal places.)

Current ratio

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