Performance Plastic Company PPC has neen operated for three years. The December 31 ,2010 account balances are: Cash $35,000 Land 30,000
Accounts Receivable 5,000 Accounts Payable 37,000
Inventory 40,000 Notes Payable 80,000
Supplies 5,000 (due in three years)
Notes Receivable 2,000 Common Stock 150,000
(due in three years) Retained Earnings 50,000
Equipment 80,000
Buildings 120,000
During the year, the company had the following summarized activities:
a. Purchased equipment that cost $21,000; paid $5,000 cash and signed a two-year note for the balance.
b. Issued an additional 2,000 shares of common stock for $20,000 cash.
c. Borrowed $50,000 cash from a local bank, payable June 30, in two years.
d. Purchased supplies for $4,000 cash.
e. Built an addition to the factory buildings for $41,000; paid $12,000 in cash and signed a three-year note for the balance.
f. Hired a new president to start January 1 of next year. The contract was for $95,000 for each full year worked.
Required:
1. Analyze transactions a-f to determine their effects on the accounting equation.
2. Record transactions effects determined in requirement 1 using journal enteries.
3. Summarize the ournal entry effect from requirement 2 using T accounts.
4. Explain your response to point f
5. Prepare a classified balance sheet at December 31,2011.