Swish Watch Corporation manufactures, sells, and services expensive watches. The com- pany has been in business for three years. At the end of the most recent year, 2013, the accounting records reported total assets of $2,255,000 and total liabilities of $1,780,000. During the current year, 2014, the following summarized events occurred:

a. Issued additional shares for $109,000 cash.

b. Borrowed $186,000 cash from the bank and signed a ten-year note.

c. A shareholder sold $5,000 of his shares in Swish Watch Corporation to another investor.

d. Built an addition onto the factory for $200,000 and paid cash to the construction company.

e. Purchased equipment for the new addition for $44,000, paying $12,000 in cash and signing a six-month note for the balance.

f. Returned a $4,000 piece of equipment, from (e), because it proved to be defective; received a cash refund.

Required:

1. Complete the spreadsheet that follows, using plus (+) for increases and minus (−) for decreases for each account. The first transaction is used as an example.

2. Did you include event (c) in the spreadsheet? Why? 3. Based on beginning balances plus the completed spreadsheet, provide the following amounts (show computations):
a. Total assets at the end of the year.
b. Total liabilities at the end of the year. c. Total shareholders' equity at the end of the year.
4. As of December 31, 2014, has the financing for Swish Watch Corporation's investment in assets primarily come from liabilities or from shareholders' equity?

Transcribed Image Text:

Shareholders' Equity Contributed Retained Earnings Liabilities + Assets Notes Payable Equipment Building Cash Capital a) +109,000 +109,000