Glenn Grimes is the founder and president of Heartland Const

Glenn Grimes is the founder and president of Heartland Construction, a real estate development venture. The business transactions during February while the company was being organized are listed as follows.

Required:

a. Prepare journal entries to record the above transactions. Select the appropriate account titles from the following chart of accounts.

b. Indicate the effects of each transaction on the company\'s assets, liabilities, and owners\' equity for the month of February. The Feb. 1 transaction is provided for you.

Feb. 1 = Cash $500,000 (assets)

Feb.	1		Grimes and several others invested $500,000 cash in the business in exchange for 30,000 shares of capital stock.
Feb.	10		The company purchased office facilities for $262,500, of which $87,500 was applicable to the land and $175,000 to the building. A cash payment of $52,500 was made and a note payable was issued for the balance of the purchase price.
Feb.	16		Computer equipment was purchased from PCWorld for $10,700 cash.
Feb.	18		Office furnishings were purchased from Hi-Way Furnishings at a cost of $9,850. A $985 cash payment was made at the time of purchase, and an agreement was made to pay the remaining balance in two equal installments due March 1 and April 1. Hi-Way Furnishings did not require that Heartland sign a promissory note.
Feb.	22		Office supplies were purchased from Office World for $445 cash.
Feb.	23		Heartland discovered that it paid too much for a computer printer purchased on February 16. The unit should have cost only $360, but Heartland was charged $395. PCWorld promised to refund the difference within seven days.
Feb.	27		Mailed Hi-Way Furnishings the first installment due on the account payable for office furnishings purchased on February 18.
Feb.	28		Received $35 from PCWorld in full settlement of the account receivable created on February 23.

Solution

a) Journal entries:

Date

Particulars

Debit

Credit

Feb 1

Cash

500000

   Capital stock

500000

Feb 10

Land

87500

Office Building

175000

    Cash

52500

    Notes Payable

210000

Feb 16

Computer systems

10700

    Cash

10700

Feb 18

Office Furnishings

9850

    Cash

985

    Accounts payable

8865

Feb 22

Office supplies

445

     Cash

445

Feb 23

Accounts receivable

35

     Computer systems

35

Feb 27

Accounts payable

4432.50

     Cash

4432.50

Feb 28

Cash

35

       Accounts receivable

35

b)

Date of Transaction

Assets

=

Liabilities

+

Owners’ Equity

Feb 1

Cash $500000

-

Common Stock $500000

Feb 10

Land $87500

Notes Payable $210000

-

Office Building $175000

-

-

Cash ($52500)

-

-

Feb 16

Computer systems $10700

-

-

Cash ($10700)

-

-

Feb 18

Office Furnishings $9850

Accounts payable $8865

-

Cash ($985)

-

-

Feb 22

Office supplies $445

-

-

Cash ($445)

-

-

Feb 23

Accounts receivable $35

-

-

Date	Particulars	Debit	Credit
Feb 1	Cash	500000
	Capital stock		500000
Feb 10	Land	87500
	Office Building	175000
	Cash		52500
	Notes Payable		210000
Feb 16	Computer systems	10700
	Cash		10700
Feb 18	Office Furnishings	9850
	Cash		985
	Accounts payable		8865
Feb 22	Office supplies	445
	Cash		445
Feb 23	Accounts receivable	35
	Computer systems		35
Feb 27	Accounts payable	4432.50
	Cash		4432.50
Feb 28	Cash	35
	Accounts receivable		35