Question

Assuming the activities in Exhibit 1 actually take place prepare a balance sheet as of the completion of item 5. To do so, draw up a basic balance sheet format and make entries to the appropriate accounts for each event. Leave sufficient space below each asset, liability, and equity account to make several entries
Item Number Description Amount 1 Investment by the former patient $50,000 2 Equity for Dr. Black in exchange for patent 25,000 3 Purchase of machinery in cash to manufacture the device (Estimated life 10 years; no salvage value) 40,000 4 Purchase of raw material inventory (in cash) 15,000 5 Loan (5 years at 10 percent) 20,000

Answer 1

Answer

The answer and procedures of the exercise are attached in the following archives.

Explanation  

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.  

Notes:

1) In first event, it is given a former patient made at investment, investment in a business means taking equity.

2) In fifth event, there just mentioned about loan amount but no discuss whether it is loan taken or made to outsider. So it is considered as loan taken. As it is 10 years, so it is a long term loan.

Download xlsx