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CP2-1 Determining Financial Statement Effects of Various Transactions: L01, L02
Lester's Home Healthcare Services (LHHS# was organized on January 1, 2005, by four friends. Each organizer invested $10,000 in the company and, in turn, was issued 8,000 shares of stock. To date, they are the only stockholders. During the first month #January 2005), the company had the following six events:
1. Collected a total of $40,000 from the organizers and, in turn, issued the shares of stock.
2. Purchased a building for $65,000, equipment for $16,000, and three acres of land for $12,000; paid $13,000 in cash and signed a note for the balance, which is due to be paid in 15 years.
3. One stockholder reported to the company that 500 shares of his Lester's stock had been sold and transferred to another stockholder for $5,000 cash.
4. Purchased supplies for $3,000 cash.
5. Sold one acre of land for $4,000 cash to another company.
6. Lent one of the shareholders $5,000 for moving costs, receiving a signed
The total credits are $40,000 sale of stock and $4,000 sale of land.
The total is $44,000.
The total debits are $3,000 in supplies, $5,000 in moving costs, and
$8,000 in shares of stock.
The toal is $36,000.
It also says that there is $83,000 to be paid back in 15 years.
It does not state if it is an annuity or is due in one lump some at the end. It also does not state the interest rate (if there is one).
To calculate an annuity, A, take the present value, P, and multipy by ((1+i)^n - 1)/i where n is the number of periods and i is the interest rate per period.
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