T Account entries for Simple Construction:

Bob Simple graduated from the BCIT Construction Management Program and decided

to start his own construction company. In this assignment we will record various entries

that might be made in a T account sheet in order to account for his second year of

operations. At the end of the first year, his income statement and balance sheet have

the following values:

Balance Sheet Entries for Last Year:

Cash: 365,000

Accounts Receivable: $17,000

Materials Inventory: $2000

Equipment: $15,000

Accumulated Amortization: $500

Accounts Payable: $22,000

Bank Loan -Long Term: $10,000

Dividend Payable: $35,000

Interest Payable: $500

Wages Payable: $5,000

Common Stock: $250,000

Retained Earnings: $76,000

Income statement Final Entries for Last Year:

Revenue: $145,000

Materials Expense: $20,000

Wages Expense: $10,000

Amortization Expense: $500

Rental Expense: $2,500

Interest Expense: $1000

Net Income: $111,000

Enter the relevant amounts in the T sheet to start the current year, and designate these

entries with an "O"

1. Bob's friend invests $40,000 into the business and receives common stock in return.

2. Bob buys construction equipment for $82,500, using a $60,000 long term bank loan

and $22,500 cash. The loan will be paid back over 20 years, with principal and interest

payments due every six months. The annual interest rate is 6%.

3. Bob pays the wages, dividend and interest that are payable from last year.

4. Bob collects $15,000 of the accounts receivable from last year.

5. Bob gets a construction job. The price is $175,000 and he expects to use $45,000 in

labour and $48,000 in materials. Both labour and materials are expected to be spread

out evenly throughout the job, which will take about two months. Bob starts the job by

buying $28,000 in materials with $15,000 in cash and $13,000 in credit.