Lee Tools Company started business on October 1, 2023. Its fiscal year runs through to September 30 of the following year. The following transactions occurred in the fiscal year that started on October 1, 2023, and ended on September 30, 2024. 1. 2. 3. On October 1, 2023, Sharon Lee invested $173,500 to start the business. Lee is the only owner. She was issued 10,000 common shares. On October 1, Lee Tools borrowed $226,000 from a venture capitalist (a lender who specializes in start-up companies) and signed a note payable. On October 1, the company rented a building. The rental agreement was a two-year contract requiring quarterly rental payments (every three months) of $14,500, payable in advance. The first payment was made on October 1, 2023 (covering the period from October 1 to December 31). Thereafter, payments were due on December 31, March 31, June 30, and September 30 for each three-month period that followed. All of the rental payments were made as specified in the agreement. 4. On October 1, the company purchased equipment costing $297,000 for cash. 5. Initial inventory was purchased for $86,000 cash. 6. Additional purchases of inventory during the year totalled $570,000, all on account. N 7. Sales during the year totalled $858,000, of which $772,200 were on account. 8. Collections from customers on account totalled $653,000. 9. Payments to suppliers on account totalled $515,500. 10. The cost of the inventory that was sold during the year was $557,000. 11. Selling and administrative expenses totalled $88,200 for the year. Of this amount, $5,500 was unpaid at year end. 12. 13. Interest on the note payable from the venture capitalist was paid at year end (September 30, 2024). The interest rate on the note is 10%. In addition, $26,100 of the note principal was repaid at that time. The equipment was depreciated based on an estimated useful life of 10 years and an estimated residual value of $27,000. 14. The company declared and paid a dividend of $8,000.

Lee Tools Company started business on October 1, 2023. Its fiscal year runs through to September 30 of the following year. The following transactions occurred in the fiscal year that started on October 1, 2023, and ended on September 30, 2024. 1. 2. 3. On October 1, 2023, Sharon Lee invested $173,500 to start the business. Lee is the only owner. She was issued 10,000 common shares. On October 1, Lee Tools borrowed $226,000 from a venture capitalist (a lender who specializes in start-up companies) and signed a note payable. On October 1, the company rented a building. The rental agreement was a two-year contract requiring quarterly rental payments (every three months) of $14,500, payable in advance. The first payment was made on October 1, 2023 (covering the period from October 1 to December 31). Thereafter, payments were due on December 31, March 31, June 30, and September 30 for each three-month period that followed. All of the rental payments were made as specified in the agreement. 4. On October 1, the company purchased equipment costing $297,000 for cash. 5. Initial inventory was purchased for $86,000 cash. 6. Additional purchases of inventory during the year totalled $570,000, all on account. N 7. Sales during the year totalled $858,000, of which $772,200 were on account. 8. Collections from customers on account totalled $653,000. 9. Payments to suppliers on account totalled $515,500. 10. The cost of the inventory that was sold during the year was $557,000. 11. Selling and administrative expenses totalled $88,200 for the year. Of this amount, $5,500 was unpaid at year end. 12. 13. Interest on the note payable from the venture capitalist was paid at year end (September 30, 2024). The interest rate on the note is 10%. In addition, $26,100 of the note principal was repaid at that time. The equipment was depreciated based on an estimated useful life of 10 years and an estimated residual value of $27,000. 14. The company declared and paid a dividend of $8,000.

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter18: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 1BD

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