Athletic Performance Company (APC) was incorporated as a private company on June 1, 2008.

The company’s accounts included the following at July 1, 2008:

Accounts payable $ 20,000 Land $100,000

Factory building 200,000 Notes payable 1,000

Cash 16,000 Retained earnings 238,000

Contributed capital 80,000 Supplies 5,000

Equipment 18,000

During the month of July, the company had the following activities:

a . Issued 2,000 shares of stock for $200,000 cash.

b . Borrowed $30,000 cash from a local bank, payable June 30, 2010.

c . Bought a factory building for $141,000; paid $41,000 in cash and signed a three-year note for

the balance.

d . Paid cash for equipment that cost $100,000.

e . Purchased supplies for $10,000 on account.


1. Analyze transactions ( a )'( e ) to determine their effects on the accounting equation. Use the

format shown in the demonstration case on page 64.

TIP: You won’t need new accounts to record the transactions described above, so have a

quick look at the ones listed before you start this question.

TIP : In transaction ( c ), three different accounts are affected.

2. Record the transaction effects determined in requirement 1 using journal entries.

3. Summarize the journal entry effects from requirement 2 using T-accounts.

TIP : Create a T-account for each account listed above. Enter the July 1, 2008, balances as

the month’s beginning balances.

4. Prepare a classifi ed balance sheet at July 31, 2008.

5. As of July 31, 2008, has the fi nancing for APC’s investment in assets primarily come from

liabilities or stockholders’ equity?