Mountain View Estates Ltd. experienced the following events during the organizing phase and its first month of operations. Some of the events were personal and did not affect the business. Others were business transactions.

Sept. 4 Gayland Jet, the major shareholder of the company, received $50,000 cash from an inheritance.

5 Jet deposited $50,000 cash in a new business bank account titled Mountain View Estates Ltd. The business issued common shares to Jet.

6 The business paid $300 cash for letterhead stationery for the new office.

7 The business purchased office furniture. The company paid cash of $20,000 and agreed to pay the account payable for the remainder, $5,000, within three months.

10 Jet sold Telus shares, which he had owned for several years, receiving $30,000 cash from his stockbroker.

11 Jet deposited the $30,000 cash from the sale of the Telus shares in his personal bank account.

12 A representative of a large company telephoned Jet and told him of the company's intention to put a down payment of $10,000 on a lot.

18 Jet finished a real estate deal on behalf of a client and submitted his bill for services, $10,000. Jet expects to collect from this client within two weeks.

21 The business paid half its account payable for the furniture purchased on September 7.

25 The business paid office rent of $4,000.

30 The business declared and paid a cash dividend of $2,000.

Requirements

1. Classify each of the preceding events as one of the following:

a. A business-related event but not a transaction to be recorded by Mountain View Estates Ltd.

b. A personal transaction for a shareholder, not to be recorded by Mountain View Estates Ltd.

c. A business transaction to be recorded by the business of Mountain View Estates Ltd.

2. Analyze the effects of the preceding events on the accounting equation of Mountain View

Estates Ltd. Use a format similar to that in Exhibit 2-1 , Panel B.

3. At the end of the first month of operations, Jet has a number of questions about the financial standing of the business. Explain the following to him:

a. How the business can have more cash than retained earnings.

b. How much in total resources the business has, how much it owes, and what Jet's ownership interest is in the assets of the business.

4. Record the transactions of the business in its journal. Include an explanation for each entry.