Recording Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the

Recording Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the Current Ratio (AP2-3) Cougar Plastics Company has been operating for three years. At December 31 of last year, the accounting records reflected the following P2-3 LO2-2, 2-4,2-5 0 Cash Investments (short-term) Accounts receivable Inventory Notes receivable (long-term) Equipment Factory building Intangibles $22,000 Accounts payable 3,000 Accrued liabilities payable 3.000 Notes payable (short-term) 20,000 Long-term notes payable 1000 Common stock 0,000Additional paid-in capital 0,000Retained carnings 5,000 $15,000 4,000 7,000 47,000 0,000 80,000 31,000 During the current year, 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 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. &. 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.
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Recording Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the Current Ratio (AP2-3) Cougar Plastics Company has been operating for three years. At December 31 of last year, the accounting records reflected the following P2-3 LO2-2, 2-4,2-5 0 Cash Investments (short-term) Accounts receivable Inventory Notes receivable (long-term) Equipment Factory building Intangibles $22,000 Accounts payable 3,000 Accrued liabilities payable 3.000 Notes payable (short-term) 20,000 Long-term notes payable 1000 Common stock 0,000Additional paid-in capital 0,000Retained carnings 5,000 $15,000 4,000 7,000 47,000 0,000 80,000 31,000 During the current year, 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 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. &. 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.

Expert Answer

 

a. Purchase of short term invetment is operating activity, cash flow from operating will decrease O
Generally long term invetments are classified under investing activity and short term under operating acitivity
b. lenting to supplier is financing activity so outflow from financing F
c. Equipment for 5000 cash paid is investing activity, outflow from it. I
d. no change NE
e. shares issued financing activity, inflow F +
f. money borrowed as it is for short term (less than one year) is operating activity, inflow O +
g. patent purchase is investing activity, outflow I
h. addition to factory, financing activity, outflow F
i. cash refund is operating activity, inflow O +
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