Question

Cannon Sporting Goods is one of the world's leading manufacturers of athletic shoes and sports apparel. The following activities occurred during a recent year. The amounts are rounded to millions, except for par value.
a. Purchased additional buildings for $174 and equipment for $260; paid $404 in cash and signed a long-term note for the rest.

b. Issued 90 shares of $2 par value common stock for $340 cash.

c. Declared $145 in dividends to be paid in the following year

d. Purchased additional short-term investments for $7,716 cash.

e. Several Cannon Sporting Goods investors sold their own stock to other investors on the stock exchange for $90.

f. Sold $4,313 in short-term investments for $4,313 in cash.

Required:

For each of the events (a) through (A. perform transaction analysis and indicate the account, amount, and direction of the effect (+ for increase and for decrease) on the accounting equation.

Check that the accounting equation remains in balance after each transaction. (If no impact on the accounting equation leave cells blank

Answer 1

Answer:

a.Building (Dr.)   $145  

Equipment (Dr.)  $260

Cash (Cr.)   $404

Long-term note (Cr.) $30

b. Cash (Dr.)   $340

Common Stock (Cr.) $180

Share Premium (Cr.) $160

c.Retained Earnings (Dr.)  $145

  Dividend Payable (Cr.) $145

d.Short-term investment(Dr.)  $7716

   Cash (Cr.)     $7716

e. No Effect on accounting equation or Canon Sporting Goods Accounts.

f.  Cash (Dr.)     $4313

Short-term Investment (Cr.)  $4313

Explanation:

a. Non-current Asset is increase by $434 and Current Assets cash account decreased by $404, Non-current liability is increased by $30.

b. Cash received debited which increases current asset by $340 and common stock account increased by $180, Share premium account increased by $160 under the stockholder account.

c. Dividends are paid from retained earnings on the equity account of the balance sheet. No effect on the assets. Retained earnings are decreased (stockholder account) and dividend payable is increased (current liability account).

d. Both are current asset accounts. Short-term investment account is increased and cash is decreased by $7716.

e. There will be no effect on the accounts of Canon Sporting Goods as the transaction occurred between two outside investors.

f. Both are current asset accounts. Cash is increased and short term investment is decreased by the $4313.