Question
East Hill Home Healthcare Services was organized five years ago by four friends who each invested $15,000 in the company and, in turn, were issued
East Hill Home Healthcare Services was organized five years ago by four friends who each invested $15,000 in the company and, in turn, were issued in total 9,000 shares of $1.00 par value common stock. To date, they are the only stockholders. At the end of last year, the accounting records reflected total assets of $712,000 ($54,000 cash; $502,000 land; $54,000 equipment; and $102,000 buildings), total liabilities of $221,000 (short-term notes payable $112,000 and long-term notes payable $109,000), and stockholders equity of $491,000 ($23,000 common stock; $94,000 additional paid-in capital; and $374,000 retained earnings). During the current year, the following summarized events occurred:
- Sold 9,400 additional shares of stock to the original organizers for a total of $97,000 cash.
- Purchased a building for $50,000, equipment for $14,000, and four acres of land for $15,000; paid $19,000 in cash and signed a note for the balance (due in 15 years). (Hint: Five different accounts are affected.)
- Sold one acre of land acquired in (b) for $3,750 cash to another company.
- Purchased short-term investments for $11,500 cash.
- One stockholder reported to the company that 360 shares of his East Hill stock had been sold and transferred to another stockholder for $3,500 cash.
- Lent one of the shareholders $5,200 for moving costs and received a signed, six-month note from the shareholder.
- Borrowed $9,000 from a local bank; signed a note due in six months.
Required:
- Was East Hill Home Healthcare Services organized as a sole proprietorship, a partnership, or a corporation?
- During the current year, the records of the company were inadequate. You were asked to prepare the summary of transactions shown above. To develop a quick assessment of their economic effects on East Hill Home Healthcare Services, complete the tabulation that follows. The first event is used as an example.
- Based only on the completed tabulation, provide the following amounts.
- Compute the current ratio for the current year.
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