Question

Maben Company was started on January 1, Year 1, and experienced the following events during its first year of operation: Acquired $30,000 cash from the issue of common stock. Borrowed $40,000 cash from National Bank. Earned cash revenues of $48,000 for performing services. Paid cash expenses of $25,000. Paid a $1,000 cash dividend to the stockholders. Acquired an additional $20,000 cash from the issue of common stock. Paid $10,000 cash to reduce the principal balance of the bank note. Paid $53,000 cash to purchase land. Determined that the market value of the land is $75,000.

Answer 1

Answer:

The accounting equation holds as follows:

Assets = Liabilities + Shareholders' Equity = $102,000

Explanation:

Note: This question not complete as the requirement is omitted. The requirement is therefore provided to complete the question before answering the question as follows:

Required:

Record the preceding transactions in the horizontal statements model. Also, in the Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA).

The explanation of the answer is now provided as follows:

Note: See the attached excel file for the the horizontal statements in which the transactions are recorded.

From the attached excel file, we have:

Assets = Cash + Land = $49,000 + $53,000 = $102,000  

Liabilities = Notes Payable = $30,000

Shareholders' Equity = Common Stock + Retained Earnings = $50,000 + $22,000 = $72,000

Liabilities + Shareholders' Equity = $30,000 + $72,000 = $102,000

Therefore, the accounting equation holds as follows:

Assets = Liabilities + Shareholders' Equity = $102,000

Also note that no figure is recorded for "Determined that the market value of the land is $75,000" because it does affect the horizontal statement since an asset must be recorded at the historical cost.

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