Answered Essay: P2-3 Recording Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the C

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

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

Cash $ 28,000 Accounts payable $ 20,000
Investments (short-term) 2,000 Accrued liabilities payable 3,400
Accounts receivable 3,200 Notes payable (short-term) 6,200
Inventory 29,000 Notes payable (long-term) 45,000
Notes receivable (long-term) 2,500 Common stock 10,600
Equipment 51,000 Additional paid-in capital 95,400
Factory building 104,000 Retained earnings 43,600
Intangibles 4,500

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

Purchased short-term investments for $7,300 cash.

Lent $5,400 to a supplier who signed a two-year note.

Purchased equipment that cost $25,000; paid $4,300 cash and signed a one-year note for the balance.

Hired a new president at the end of the year. The contract was for $84,000 per year plus options to purchase company stock at a set price based on company performance.

Issued an additional 2,500 shares of $0.50 par value common stock for $16,000 cash.

Borrowed $11,000 cash from a local bank, payable in three months.

Purchased a patent (an intangible asset) for $1,600 cash.

Built an addition to the factory for $25,000; paid $8,700 in cash and signed a three-year note for the balance.

Returned defective equipment to the manufacturer, receiving a cash refund of $1,800.


1. & 2. Post the current year transactions to T-accounts for each of the accounts on the balance sheet. (Two items have been given in the cash T-account as examples).

Cash Investments (short-term)
Beg. Bal. 28,000 Beg. Bal. 2,000
7,300 (a)
5,400 (b)
End. Bal. 2,000
End. Bal. 15,300
Accounts Receivable Inventory
Beg. Bal. 3,200 Beg. Bal. 29,000
End. Bal. 3,200 End. Bal. 29,000
Notes Receivable (long-term) Equipment
Beg. Bal. 2,500 Beg. Bal. 51,000
End. Bal. 2,500 End. Bal. 51,000
Factory Building Intangibles
Beg. Bal. 104,000 Beg. Bal. 4,500
End. Bal. 104,000 End. Bal. 4,500
Accounts Payable Accrued Liabilities Payable
Beg. Bal. 20,000 Beg. Bal. 3,400
End. Bal. 20,000 End. Bal. 3,400
Notes Payable (short-term) Long-Term Notes Payable
Beg. Bal. 6,200 Beg. Bal. 45,000
End. Bal. 6,200 End. Bal. 45,000
Common Stock Additional Paid-in Capital
Beg. Bal. 10,600 Beg. Bal. 95,400
End. Bal. 10,600 End. Bal. 95,400
Retained Earnings
Beg. Bal. 43,600
End. Bal. 0 43,600

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