Nicole has decided that she is going to start her business, Nicole’s Getaway Spa (NGS). A lot hasto be done when starting a new business. Here are some transactions that have occurred prior toApril 30.a. Received $80,000 cash when issuing 8,000 new common shares.b. Purchased land by paying $2,000 cash and signing a note payable for $7,000 due in threeyears.c. Hired a new aesthetician for a salary of $1,000 a month, starting next month.d. NGS purchased a company car for $18,000 cash (list price of $21,000) to assist in runningerrands for the business.e. Bought and received $1,000 in supplies for the spa on credit.f. Paid $350 of the amount owed in ( e ).g. Nicole sold 100 of her own personal shares to Raea Gooding for $300.Required:1. For each of the events, prepare journal entries if a transaction exists, checking that debitsequal credits. If a transaction does not exist, explain why there is no transaction.2. Assuming that the beginning balances in each of the accounts are zero, complete T-accountsto summarize the transactions ( a )–( g ).3. Prepare a classified balance sheet at April 30 using the information given in the transactions.4. Calculate the current ratio at April 30. What does this ratio indicate about the ability of NGSto pay its current liabilities?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Nicole has decided that she is going to start her business, Nicole’s Getaway Spa (NGS). A lot has
to be done when starting a new business. Here are some transactions that have occurred prior to
April 30.
a. Received $80,000 cash when issuing 8,000 new common shares.
b. Purchased land by paying $2,000 cash and signing a note payable for $7,000 due in three
years.
c. Hired a new aesthetician for a salary of $1,000 a month, starting next month.
d. NGS purchased a company car for $18,000 cash (list price of $21,000) to assist in running
errands for the business.
e. Bought and received $1,000 in supplies for the spa on credit.
f. Paid $350 of the amount owed in ( e ).
g. Nicole sold 100 of her own personal shares to Raea Gooding for $300.
Required:
1. For each of the events, prepare
equal credits. If a transaction does not exist, explain why there is no transaction.
2. Assuming that the beginning balances in each of the accounts are zero, complete T-accounts
to summarize the transactions ( a )–( g ).
3. Prepare a classified balance sheet at April 30 using the information given in the transactions.
4. Calculate the
to pay its current liabilities?
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