The business model for SportsEquip, Inc. involves operating…
The business model for SportsEquip, Inc. involves operating a retail store focused on selling outdoor recreational products, such as kayaks. SportsEquip experienced the following events during the year. A) On January 1, SportsEquip Inc. secured a 5-year, $500,000 loan, at 10% interest rate with payments due every six months, from a local bank to support its expansion plans. Show how this transaction affects financial statements on January 1 (mention specific accounts). (8 points) B) On January 7, SportsEquip Inc. purchased on credit 50 kayaks, $1,000 each. How does this transaction affect the financial statements (mention specific accounts)? (8 points) C) On January 15, SportsEquip, purchases an additional 100 kayaks, $1,000 each, and pays in cash. How does this transaction affect financial statements (mention specific accounts). (8 points) D) During the month of February, the company sells on account 120 kayaks for $1,200 each, to corporate customers that are in the business of offering kayak lessons. How does this affect SportsEquip’s financial statements during the month of February (mention specific accounts). (8 points) E) On March 12, SportsEquip Inc. pays $25,000 to its suppliers for kayaks it had bought back in January. How does this transaction affect the financial statements (mention specific accounts)? (8 points) F) On March 28, SportsEquip Inc. gets paid $144,000 for kayaks the customers had bought back in February. How does this transaction affect the financial statements (mention specific accounts)? (8 points) G) Between January to March, SportsEquip Inc. paid $15,000 in salaries to employees. How does this affect the financial statements (mention specific accounts)? (8 points) H) SportsEquip Inc. creates financial statements for the quarter ending March 31. Interest on the bank loan that was issued back in January (see question 2. (A) above) will be paid in June. How does the bank loan affect the financial statements prepared on March 31 (mention specific accounts)? (8 points) I) Motivated by positive customer turnout, SportsEquip Inc. is planning to open new stores in multiple cities. To fund this planned expansion, the company hires a boutique investment bank and offers $1,000,000 of its common stock for sale. The company ends up raising $900,000 in common stock. What’s the effect on financial statements (mention specific accounts)? (8 points)
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