Problem

Consider the following January transactions:

1. On January 1, 20X1, three persons, James, Bosh, and Wade, formed JBW Corporation. JBW is a wholesale distributor of electronic equipment. The company issued 10,000 shares of common stock ($1 par value) to each of the three investors for $10 cash per share. Use two stockholders' equity accounts: Capital Stock (at par) and Additional Paid-in Capital.

2. JBW acquired merchandise inventory of $75,000 for cash.

3. JBW acquired merchandise inventory of $85,000 on open account.

4. JBW returned for full credit unsatisfactory merchandise that cost $11,000 in transaction 3.

5. JBW acquired equipment of $40,000 for a cash down payment of $10,000, plus a 3-month promissory note of $30,000.

6. As a favor, JBW sells equipment of $4,000 to a business neighbor for cash. The equipment had cost $4,000.

7. JBW pays $16,000 on the account described in transaction 3.

8. JBW buys merchandise inventory of $100,000. The company pays one-half of the amount in cash, and owes one-half on open account.

9. Wade sells one-half of his common stock to Nowitzki for $13 per share.

Required

1. By using a format similar to Exhibit, prepare an analysis showing the effects of the January transactions on the financial position of JBW Corporation.

2. Prepare a balance sheet as of January 31, 20X1.

Step-by-step solution