East Hill Home Healthcare Services was organized by four
friends who each invested $11,000 in the company and, in turn, was issued 8,500
shares of $1.00 par value stock. To date, they are the only stockholders. At
the end of last year, the accounting
records reflected total assets of $734,000 ($62,000 cash; $502,000 land;
$56,000 equipment; and $114,000 buildings), total liabilities of $224,000
(short-term notes payable of $114,000 and long-term notes payable of $110,000),
and stockholders’ equity of $510,000 ($23,000 of common stock, $94,000 of
additional paid-in capital, and $393,000 retained earnings). During the current
year, the following summarized events occurred:
Sold 10,600 additional shares of stock to the original
organizers for a total of $109,000 cash.
Purchased a building for $67,000, equipment for $17,000, and
four acres of land for $16,000; paid $12,000 in cash and signed a note for the
balance (due in 15 years). (Hint: Five different accounts are affected.)
Sold one acre of land acquired in (b) for $4,000 cash to
another company.
Purchased short-term investments for $17,500 cash.
One stockholder reported to the company that 350 shares of
his East Hill stock had been sold and transferred to another stockholder for
$3,800 cash.
Lent one of the shareholders $5,100 for moving costs,
receiving a signed six-month note from the shareholder.
Required:
1. Was East Hill Home Healthcare Services organized as a
sole proprietorship, a partnership, or a corporation?
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