16. Recording transactions and preparing a balance sheet. Whitley Products Corporation begins operations on April 1. The firm engages in the following transactions during April:
(1) Issues 25,000 shares of $10 par value common stock for $15 per share in cash.
(2) Acquires land costing $25,000 and a building costing $275,000 by paying $50,000 in cash and signing a note payable to a local bank for the remainder of the purchase price.
(3) Acquires equipment costing $125,000 for cash.
(4) Pays $2,800 to transport the equipment to the office of Whitley Products Corporation.
U.S. GAAP treats the cost to transport the equipment as part of the acquisition cost of the equipment.
(5) Pays $3,200 to install and test the equipment. U.S. GAAP treats the cost to install and test the equipment as part of the acquisition cost of the equipment.
68 Chapter 2 The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet
(6) Pays the one-year premium of $12,000 for property and liability insurance on the building and equipment for coverage beginning May 1.
(7) Agrees to manufacture custom-ordered merchandise for a particular customer begin- ning in May at a selling price of $15,000. The customer advances $1,500 of the selling price with the order.
(8) Orders raw materials costing $60,000 from various suppliers.
(9) Receives notification from the suppliers that the raw materials ordered in transaction
(8) were shipped. The merchandise belongs to the suppliers until received by Whitley Products Corporation.
(10) Receives the raw materials shipped in transaction (9).
(11) Discovers that raw materials costing $8,000 are damaged and returns them to the sup- plier. The firm has not yet paid the supplier.
(12) Pays the raw materials suppliers in transactions (8), (9), (10), and (11) the amounts due, after subtracting 2% for prompt payment. The firm treats cash discounts as a reduction in the acquisition cost of the raw materials.
a. Enter these twelve transactions in T-accounts.
b. Prepare a balance sheet for Whitley Products Corporation as of April 30.