CHAPTER 1
Accounting in Action
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 1-1
(a) $90,000 – $50,000 =3D $40,000 (Owner’s Equity).
(b) $40,000 + $70,000 =3D $110,000 (Assets).
(c) $94,000 – $60,000 =3D $34,000 (Liabilities).
BRIEF EXERCISE 1-2
(a) $120,000 + $232,000 =3D $352,000 (Total assets).
(b) $190,000 – $80,000 =3D $110,000 (Total liabilities).
(c) $800,000 – 0.5($800,000) =3D $400,000 (Owner’s equity).
BRIEF EXERCISE 1-3
(a) ($800,000 + $150,000) – ($500,000 – $80,000) =3D $530,000
(Owner’s equity).
(b) ($500,000 + $100,000) + ($800,000 – $500,000 – $70,000) =3D $830,000
(Assets).
(c) ($800,000 – $80,000) – ($800,000 – $500,000 + $120,000) =3D $300,00= 0
(Liabilities).
BRIEF EXERCISE 1-4
A (a) Accounts receivable &= nbsp; A (d) Office supplies
L &nbs=
p; (b) Salaries payable &=
nbsp;
A (c) Equipment = &nb= sp; L &nbs= p; (f) Notes payable
BRIEF EXERCISE 1-5
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Assets=
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Liabil=
ities |
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Owner&=
#8217;s Equity |
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(a) |
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+ |
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+ |
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NE |
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(b) |
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+ |
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NE |
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+ |
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(c) |
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– |
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NE |
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– |
BRIEF EXERCISE 1-6
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Assets=
|
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Liabil=
ities |
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Owner&=
#8217;s Equity |
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(a) |
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+ |
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NE |
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+ |
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(b) |
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– |
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NE |
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– |
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(c) |
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NE |
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NE |
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NE |
BRIEF EXERCISE 1-7
E (a) Advertising expense &= nbsp; D (e) Bergman, Drawing
R (b) Commission revenue &= nbsp; R (f) Rent revenue
E (c) Insurance expense &= nbsp; E (g) Utilities expense
E (d) Salaries expense
BRIEF EXERCISE 1-8
R (a) Received cash for services performed
NOE (b) Paid cash to purchase equipment
E (c) Paid employee salaries
BRIEF EXERCISE 1-9
LOPEZ COMPA= NY
Balance She= et
December 31= , 2008
&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;
Assets
Cash..........................................= .......................................................... $ 49,000
Accounts receivable..........................= .............................................. 72,500
Total assets..............................= ................................................. $121,500=
Liabilities and Owner’s Equity
Liabilities
Accounts payable.............................= ....................................... $ 90,000
Owner’s equity
Kim Lopez, Capital......................= ............................................. 31,500
&= nbsp; Total liabilities and owner’s equity= ............................... $121,500=
BRIEF EXERCISE 1-10
BS (a) Notes payable
IS <= span style=3D'mso-tab-count:1'> (b) Advertising expense
OE, BS&nb= sp; (c) Trent Buchanan, Capital
BS (d) Cash
IS <= span style=3D'mso-tab-count:1'> (e) Service revenue
SOLUTIONS TO EXERCISES
EXERCISE 1-1
C&n= bsp; Analyzing and interpreting informat= ion.
R&n= bsp; Classifying economic events.
C&n= bsp; Explaining uses, meaning, and limit= ations of data.
R&n= bsp; Keeping a systematic chronological = diary of events.
R&n= bsp; Measuring events in dollars and cen= ts.
C&n= bsp; Preparing accounting reports.
C&n= bsp; Reporting information in a standard format.
I Selecting economic activities relev= ant to the company.
R&n=
bsp; Summarizing economic events.
EXERCISE 1-2
(a) Internal users
Marketing m= anager
Production supervisor
Store manag= er
Vice-presid= ent of finance
External
users
Customers
Internal Revenue Service
Labor unions
Securities and Exchange Co= mmission
Suppliers
(b) I Can we afford to give o= ur employees a pay raise?
&= nbsp; E Did the company earn a satisfactory income?
&= nbsp; I Do we need to borrow in= the near future?
&=
nbsp; E How does the company’s profitability compare to other companie=
s?
=
I What does it cost us to
manufacture each unit produced?
=
I Which product should we
emphasize?
=
E Will the company be abl=
e to
pay its short-term debts?
EXERCISE 1-3
Larry Smith, president of Smith Company, instructed Ron Rivera, the head of the accounting department, to report the company’s land in their accounting reports at its market value of $170,000 instead of its cost of $100,000, in an effort to make the company appear to be a better investment. The cost principle requires that assets be recorded and reporte= d at their cost, because cost is reliable and can be objectively measured and verified.
The stakeholders include stockholders and creditors of Smith Company, potential stockholders and creditors, other users of Smith’s accounting reports, Larry Smith, and Ron Rivera. All users of Smith’s accounting reports could be harmed by relying on information which violates accounting principles. Larry Smith could benefit if the company is able to attract more investors, but would be harmed if the fraudulent repor= ting is discovered. Similarly, Ron Rivera could benefit by pleasing his boss, but would be harmed if the fraudulent reporting is discovered.
Ron’s alternatives = are to report the land at $100,000 or to report it at $170,000. Reporting the land= at $170,000 is not appropriate since it would mislead many people who rely on Smith’s accounting reports to make finan= cial decisions. Ron should report the land at its cost of $100,000. He sh= ould try to convince Larry Smith that this is the appropriate course of action, = but be prepared to resign his position if Smith insists.
EXERCISE 1-4
1. &nb= sp; Incorrect. The cost principle requ= ires that assets be recorded and reported at their cost.
2. &nb= sp; Correct. The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms= of money.
3. &nb= sp; Incorrect. The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owner and a= ll other economic entities.
EXERCISE 1-5
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Asset |
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Liability= |
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OwnerR= 17;s Equity |
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Cash |
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Accounts payable |
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Karin Meredith, Capital |
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Cleaning equipment |
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Notes payable |
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Cleaning supplies |
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Salaries payable |
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Accounts receivable |
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EXERCISE 1-6
1. Increase in assets and increase in owner’s equity.
2. Decrease in assets and decrease in owner’s equity.
3. Increase in assets and increase in liabilities.
4. Increase in assets and increase in owner’s equity.
5. Decrease in assets and decrease in owner’s equity.
6. Increase in assets and decrease in assets.
7. Increase in liabilities and decrease in owner’s equity.
8. Increase in assets and decrease in assets.
9. Increase in assets and increase in owner’s equity.
EXERCISE 1-7
1. (c) &= nbsp; 5. (d)
2. (d) &= nbsp; 6. (b)
3. (a) &= nbsp; 7. (e)
4. (b) &= nbsp; 8. (f)
EXERCISE 1-8
(a) &= nbsp; 1. Owner invested $1= 5,000 cash in the business.
&nbs= p; 2. Purchased office = equipment for $5,000, paying $2,000 in cash and the balance of $3,000 on account.
&nbs= p; 3. Paid $750 cash for supplies.
&nbs= p; 4. Earned $8,300 in revenue, receiving $4,600 cash and $3,700 on account= .
&nbs= p; 5. Paid $1,500 cash = on accounts payable.
EXERCISE 1-8 (Continued)
&nb= sp; 6. Owner withdrew $2= ,000 cash for personal use.
&nb= sp; 7. Paid $650 cash for rent.
&nb= sp; 8. Collected $450 ca= sh from customers on account.
&nb= sp; 9. Paid salaries of $4,900.
&nb= sp; 10. Incurred $500 of utilities expense on account.
(b) Investment.................................................................= .................. $15,000
Service revenue.............................= ............................................ &= nbsp; 8,300
Drawings..........................................= ........................................... (2,000 )
Rent expense.............................= ................................................. &= nbsp; (650 )
Salaries expense.............................= .......................................... (4,900 )
Utilities expense.............................= ............................................ (500 )
Increase
in capital..........................=
........................................... $15,250
(c) Service revenue..........................................= ............................... $8,30= 0
Rent expense.............................= ................................................. &= nbsp; (650 )
Salaries expense.............................= .......................................... (4,900 )
Utilities expense.............................= ............................................ (500 )
Net income..............................= .................................................... $2= ,250
EXERCISE 1-9
S. MOSES &a= mp; CO.
Income Stat= ement
For the Mon= th Ended August 31, 2008
&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;
Revenues
Service revenue.............................= ............................. &= nbsp; &nbs= p; $8,300
Expenses
Salaries expense.............................= ............................ $4,900
Rent expense.............................= .................................. &= nbsp; 650
Utilities expense.............................= ............................. 500
&= nbsp; Total expenses............................= ........................ &= nbsp; &nbs= p; 6,050
Net income..............................= .............................................. &= nbsp; &nbs= p; $2,250
EXERCISE 1-9 (Continued)
S. MOSES &a= mp; CO.
Owner’= ;s Equity Statement
For the Mon= th Ended August 31, 2008
&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;
S. Moses, Capital, August 1............= .............................. &= nbsp; &nbs= p; $ 0
Add: Investments......................................................... = $15,000 &= nbsp;
&= nbsp; Net income..............................= ............................. 2,250 17,250
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp;
Less: Drawings.............................................................. = &= nbsp; &nbs= p; 2,000
S. Moses, Capital, August 31...........= ............................ &= nbsp; &nbs= p; $15,250
S. MOSES &a= mp; CO.
Balance She= et
August 31, = 2008
&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;
Assets
Cash..........................................= .......................................................... $ 8,250
Accounts receivable..........................= .............................................. &= nbsp; 3,250
Supplies..........................................= ................................................... &= nbsp; 750
Office equipment...........................= ................................................... 5,000
Total assets..............................= ................................................. $17,250
Liabilities and Owner’s Equity
Liabilities
Accounts payable.............................= ....................................... $ 2,000
Owner’s equity
S. Moses, Capital......................= ................................................ 15,250
&= nbsp; Total liabilities and owner’s equity= ............................... $17,250
EXERCISE 1-10
(a) Owner’s equity—12= /31/07 ($400,000 – $250,000).........= ..... $150,000
Owner’s equity—1/1/07.................= .......................................... 100,000
Increase in owner’s equity.............= ........................................ = 50,000
Add: Drawings.................................................................= ....... 15,000
Net income for 2007.....................= ............................................ $ 65,000
EXERCISE 1-10 (Continued)
(b) Owner’s equity—12=
/31/08
($460,000 – $300,000).........=
.... $160,000
Owner’s equity—1/1/08—see (a)...= ...................................... 150,000
Increase in owner’s equity.............= ...................................... &= nbsp; 10,000
Less: Additional investment..........................................=
.....
Net loss for 2008.......................= .............................................. $ 40,000
(c) Owner’s equity—12=
/31/09
($590,000 – $400,000).........=
.... $190,000
Owner’s equity—1/1/09—see (b)...= ...................................... 160,000
Increase in owner’s equity.............= ...................................... &= nbsp; 30,000
Less: Additional investment..........................................=
.....
&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; 15,000
Add: Drawings..........................................=
............................
Net income for 2009.....................= .......................................... $ 45,000
EXERCISE 1-11
(a) Total assets (beginning of ye= ar)......................................... = $95,= 000
Total liabilities (beginning of year).....= ................................ = 85,000
Total owner’s equity (beginning of year).......................... $10,000
(b) Total owner’s equity (e= nd of year)...............................= ....... $40,000
Total owner’s equity (beginning of year).......................... = 10,000
Increase in owner’s equity.............= ...................................... $30,000
Total
revenues............................=
............................................ $215,000
Total expenses............................= ........................................... 175,000
Net income..............................= ................................................. $ 40,000
Increase in owner’s equity.............= ................ &= nbsp; &nbs= p; $30,000
Less: Net income............................................ $(40,000)
Add: Drawings..........................................=
...... 24,000) =
(16,000 ) Additional
investment..........................=
........... &=
nbsp; &nbs=
p; $14,000<=
/u> (c) Total assets (beginning of ye=
ar)......................................... =
$129,000
Total
owner’s equity (beginning of year)..........................
Total liabilities (beginning of year).....= ................................ $ 49,000
EXERCISE 1-11 (Continued)
(d) Total owner’s equity (e=
nd of
year)...............................=
....... $130,000
Total
owner’s equity (beginning of year)..........................
Increase in owner’s equity.............= ...................................... $ 50,000
Total
revenues............................=
............................................ $100,000
Total
expenses............................=
...........................................
Net income..............................= ................................................. $ 45,000
Increase in owner’s equity.............= ................ &= nbsp; &nbs= p; $50,000
Less: Net income............................................ $(45,000)
&=
nbsp; Ad=
ditional
investment..........................=
(25,000)
Drawings..........................................= .................. &= nbsp; &nbs= p; $20,000
EXERCISE 1-12
LINDA STANL= EY CO.
Income Stat= ement
For the Yea= r Ended December 31, 2008
&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;
Revenues
Service revenue.............................= ......................... &= nbsp; &nbs= p; $62,500
Expenses
Salaries expense.............................= ....................... $30,000
Rent expense.............................= .............................. 10,400
Utilities expense.............................= ......................... &= nbsp; 3,100
Advertising expense.............................= ................. 1,800
&= nbsp; Total expenses............................= ................... &= nbsp; &nbs= p; 45,300
Net income..............................= ......................................... &= nbsp; &nbs= p; $17,200
LINDA STANL= EY CO.
Owner’= ;s Equity Statement
For the Yea= r Ended December 31, 2008
&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;
Linda Stanley, Capital, January 1.........= .......................................... $48,000
Add: Net income..........................................= ..................................... 17,200
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp;
Less: Drawings..............................................................= .................... 6,000
Linda Stanley, Capital, December 31.......= ...................................... $59,200<= /u>
EXERCISE 1-13
MENDEZ COMP= ANY
Balance She= et
December 31= , 2008
&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;
Assets
Cash..........................................= .......................................................... $15,000
Accounts receivable..........................= .............................................. &= nbsp; 8,500
Supplies..........................................= ................................................... &= nbsp; 8,000
Equipment..........................................= ............................................... 46,000
Total assets..............................= ................................................. $77,500
Liabilities and Owner’s Equity
Liabilities
Accounts payable.............................= ....................................... $20,000
Owner’s equity
Mendez, Capital ($67,500 – $10,000)...= ................................. 57,500
&= nbsp; Total liabilities and owner’s equity= ............................... $77,500
EXERCISE 1-14
(a) Camping fee revenues..........................................= .................. $140,000
General store revenues......................= .................................... 50,000
&= nbsp; Total revenue.............................= ....................................... 190,= 000
Expenses..........................................= ......................................... 150,000
Net
income..............................=
................................................... $ 40,000
(b= ) &= nbsp; &nbs= p; &= nbsp; &nbs= p; DEER PARK
= &nb= sp; = &nb= sp; Balance Sheet
= &nb= sp; = &nb= sp; December 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
= &nb= sp; = &nb= sp; = Assets
Cash..........................................= .................................................. $ 23,000
Supplies..........................................= ........................................... &= nbsp; 2,500
Equipment..........................................= ....................................... 105,500
&= nbsp; Total assets..............................= ......................................... $131,000=
EXERCISE 1-14 (Continued)
= &nb= sp; = Balance Sheet (Continued)
= &nb= sp; = &nb= sp; December 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
= &nb= sp; = Liabilities and Owner’s Equity
Liabilities
&= nbsp; Notes payable.............................= ...................................... $ 60,000
&= nbsp; Accounts payable.............................= ............................... 11,000
&= nbsp; &nbs= p; Total liabilities.........................= .................................. = 71,000
Owner’s equity
&= nbsp; Jan Nab, Capital ($131,000 – $71,000)......................... 60,000
&= nbsp; &nbs= p; Total liabilities and owner’s equity= ....................... $131,000=
EXERCISE 1-15
SUMMERS CRU= ISE COMPANY
Income Stat= ement
For the Yea= r Ended December 31, 2008
&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;
Revenues
Ticket revenue.............................= ...................... &= nbsp; &nbs= p; $325,000
Expenses
Salaries expense.............................= .................. $142,000
Maintenance expense.............................= ......... = 95,000
Property tax expense.........................= .............. = 10,000
Advertising
expense.............................=
............
&= nbsp; Total expenses............................= ............... &= nbsp; &nbs= p; 250,500
Net income..............................= .................................... &= nbsp; &nbs= p; $ 74,500
EXERCISE 1-16
KEVIN JOHNS= ON, ATTORNEY
Owner’= ;s Equity Statement
For the Yea= r Ended December 31, 2008
&nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;
Kevin Johnson, Capital, January 1.........= ............................... $ 23,000 (a)
Add: Net income..........................................= ............................ 139,000 (b)
&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; 162,000
Less: Drawings..............................................................= ........... 79,000
Kevin Johnson, Capital, December 31.......= ........................... $ 83,000 (c)
EXERCISE 1-16 (Continued)
Supporting Computations
(a) Assets, January 1, 2008..........................................= ................ $85,= 000
Liabilities, January 1, 2008.....................= ................................ 62,000
Capital, January 1, 2008.....................= .................................... $= 23,000
(b) Legal service revenue..........................................= .................. $350,000
Total expenses............................= ............................................. 211,000
Net income..............................= ................................................... $139,000=
(c) Assets, December 31, 2008..........................................= .......... $168,000
Liabilities, December 31, 2008...................= ............................ 85,000
Capital, December 31, 2008...................= ................................ $ 83,000
SOLUTIONS TO PROBLEMS
|
PROBLEM 1= -1A |
PROBLEM 1-1A (Continued)
(b) Ending capital..........................................= ................................... $12,060
Add: Drawings.................................................................=
.........
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp;
Deduct: Investments............................................................... <=
/span>
Net income..............................= .................................................... $<= span style=3D'mso-spacerun:yes'> 3,060
= &nb= sp; = &nb= sp; = OR
Service revenue($5,100 + $750)..............= .............. &= nbsp; &nbs= p; $5,850
Expenses
&= nbsp; Salaries..........................................= .................... $2,00= 0 &= nbsp;
&= nbsp; Rent..........................................= ........................... &= nbsp; 400 &n= bsp;
&= nbsp; Advertising..........................................= .............. &= nbsp; 250 &nbs= p;
&= nbsp; Utilities..........................................= ...................... 140 2,790
&= nbsp; &nbs= p; Net income..............................= ................... &= nbsp; &nbs= p; $3,060
|
PROBLEM 1= -2A |
PROBLEM 1-2A (Continued)
(b) = &nb= sp; MARIA GONZALEZ, VETERINARIAN
= &nb= sp; = &nb= sp; Income Statement
= &nb= sp; For the Month Ended September 30, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Revenues
&= nbsp; Service revenue.............................= ..................... &= nbsp; &nbs= p; $8,000
Expenses
&= nbsp; Salaries expense.............................= .................... $1,700
&= nbsp; Rent expense.............................= .......................... = 900
&= nbsp; Advertising expense.............................= .............. = 300
&= nbsp; Utilities expense.............................= ..................... 170
&= nbsp; &nbs= p; Total expenses............................= ................ &= nbsp; &nbs= p; 3,070
Net income..............................= ...................................... &= nbsp; &nbs= p; $4,930
= &nb= sp; = Owner’s Equity Statement
= &nb= sp; For the Month Ended September 30, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
M. Gonzalez, Capital, September 1......= .................................. $13,700
Add: Net income..........................................= ............................ <= span style=3D'mso-spacerun:yes'> 4,930
&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; 18,630
Less: Drawings..............................................................=
...........
M. Gonzalez, Capital, September 30.....= ................................. $17,630<= /u>
PROBLEM 1-2A (Continued)
= &nb= sp; = &nb= sp; Balance Sheet
= &nb= sp; = &nb= sp; September 30, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
= &nb= sp; = &nb= sp; = Assets
Cash..........................................= ................................................... $15,200
Accounts receivable..........................= ....................................... &= nbsp; 5,900
Supplies..........................................= ............................................. &= nbsp; 600
Office
equipment...........................=
.............................................
&= nbsp; Total assets..............................= .......................................... $29,800<= /u>
= &nb= sp; = Liabilities and Owner’s Equity
Liabilities
&= nbsp; Notes payable.............................= ........................................ $10,000
&=
nbsp; Accounts
payable.............................=
.................................
&= nbsp; &nbs= p; Total liabilities.........................= ................................... 12,170
Owner’s equity
&=
nbsp; M.
Gonzalez, Capital...................=
.......................................
&= nbsp; &nbs= p; Total liabilities and owner’s equity= ........................ $29,800<= /u>
|
PROBLEM 1-3A |
(a) = &nb= sp; = SKYLINE FLYING SCHOOL
= &nb= sp; = &nb= sp; Income Statement
= &nb= sp; = For the Month Ended May 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Revenues
&= nbsp; Lesson revenue.............................= ............... &= nbsp; &nbs= p; $7,500
Expenses
&= nbsp; Fuel expense.............................= .................... = $2,500
&= nbsp; Rent expense.............................= .................... &= nbsp; 1,200
&= nbsp; Advertising expense.............................= ....... &= nbsp; 500
&= nbsp; Insurance expense.............................= .......... &= nbsp; 400
&= nbsp; Repair expense.............................= ................ = 400
&= nbsp; &nbs= p; Total expenses............................= .......... &= nbsp; &nbs= p; 5,000
Net income..............................= ................................ &= nbsp; &nbs= p; $2,500
= &nb= sp; = Owner’s Equity Statement
= &nb= sp; = For the Month Ended May 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Jeff Wilkins, Capital, May 1.............= .................... &= nbsp; &nbs= p; $ 0
Add: Investments..........................................= ...... $45,0= 00 &= nbsp;
&=
nbsp; Net
income..............................=
....................
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp;
Less: Drawings....................................................
Jeff Wilkins, Capital, May 31............= ................... &= nbsp; &nbs= p; $46,000
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p;
....... Assets
Cash..........................................= ................................................... $ 5,600
Accounts receivable..........................= ....................................... &= nbsp; 7,200
Equipment..........................................=
.........................................
&= nbsp; Total assets..............................= .......................................... $76,800<= /u>
PROBLEM 1-3A (Continued)
&= nbsp; &nbs= p; &= nbsp; SKYLINE FLYING SCHOOL
&= nbsp; &nbs= p; &= nbsp; Balance Sheet (Continued)
&= nbsp; &nbs= p; &= nbsp; &nbs= p; May 31, 2008
=
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
Liabilit= ies and Owner’s Equity
Liabilities
&= nbsp; Notes payable.............................= ........................................ $30,000
&=
nbsp; Accounts
payable.............................=
.................................
&= nbsp; &nbs= p; Total liabilities.........................= ................................... 30,800
Owner’s equity
&=
nbsp; Jeff
Wilkins, Capital...........................................................
&nb= sp; = Total liabilities and owner’s equity= ........................ $76,800<= /u>
(b) =
&nb=
sp; =
SKYLINE FLYING SCH=
OOL
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; Income
Statement
For the Month Ended May 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Revenues
&= nbsp; Lesson revenue ($7,500 + $900).............= ... &= nbsp; &nbs= p; $8,400
Expenses
&= nbsp; Fuel expense ($2,500 + $1,500)...........= ....... = $4,000
&= nbsp; Rent expense.............................= .................... &= nbsp; 1,200
&= nbsp; Advertising expense.............................= ....... &= nbsp; 500
&= nbsp; Insurance expense.............................= .......... &= nbsp; 400
&= nbsp; Repair expense.............................= ................ = 400
&= nbsp; &nbs= p; Total expenses............................= .......... &= nbsp; &nbs= p; 6,500
Net income..............................= ................................ &= nbsp; &nbs= p; $1,900
= &nb= sp; = SKYLINE FLYING SCHOOL
= &nb= sp; = Owner’s Equity Statement
= &nb= sp; = For the Month Ended May 31, 2008
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p;
Jeff Wilkins, Capital, May 1.............= .................... &= nbsp; &nbs= p; $ 0
Add: Investments..........................................= ...... $45,000
&=
nbsp; Net
income..............................=
...................
&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; 46,900
Less: Drawings....................................................
Jeff
Wilkins, Capital, May 31............=
................... &=
nbsp; &nbs=
p; $45,400
PROBLEM 1= -4A |
PROBLEM 1-4A (Continued)
(b) &= nbsp; &nbs= p; &= nbsp; &nbs= p; MILLER DELIVERIES
&= nbsp; &nbs= p; &= nbsp; &nbs= p; Income Statement
&= nbsp; &nbs= p; &= nbsp; For the Month Ended June 30, 2008
&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Revenues
&= nbsp; Service revenue ($4,400 + $1,500)...........= ...... &= nbsp; &nbs= p; $5,900
Expenses
&= nbsp; Salaries expense.............................= .................. $1,000
&= nbsp; Rent expense.............................= ......................... &= nbsp; 500
&= nbsp; Utilities expense.............................= .................... = 250
&= nbsp; Gasoline expense.............................= ................. 100
&= nbsp; &nbs= p; Total expenses............................= ............... &= nbsp; &nbs= p; 1,850
Net income..............................= .................................... &= nbsp; &nbs= p; $4,050
(c= ) &= nbsp; &nbs= p; &= nbsp; &nbs= p; MILLER DELIVERIES
= &nb= sp; = &nb= sp; Balance Sheet
= &nb= sp; = &nb= sp; June 30, 2008
=
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
&nb=
sp;
= &nb= sp; = &nb= sp; = Assets
Cash..........................................= ................................................... $ 8,200
Accounts receivable..........................= ....................................... &= nbsp; 3,150
Supplies..........................................= ............................................. &= nbsp; 150
Delivery
van.................................=
...............................................
&= nbsp; Total assets..............................= .......................................... $23,500<= /u>
= &nb= sp; = Liabilities and Owner’s Equity
Liabilities
&= nbsp; Notes payable.............................= ........................................ $ 9,500
&=
nbsp; Accounts
payable.............................=
.................................
&= nbsp; &nbs= p; Total liabilities.........................= ................................... &= nbsp; 9,650
Owner’s equity
&=
nbsp; M.
Miller, Capital.....................=
............................................
= ; &n= bsp; Total liabilities and owner’s equity= ........................ $23,500<= /u>
|
PROBLEM 1-5A |
|
(a) |
Karma Company |
|
Yates Company |
|
McCain Company |
|
Dench Company |
||||
|
|
(a) |
$ 45,000 |
|
(d) |
$50,000 |
|
(g) |
$120,000 |
|
(j) |
$ 80,000 |
|
|
(b) |
115,000 |
|
(e) |
62,000 |
|
(h) |
70,000 |
|
(k) |
250,000 |
|
|
(c) |
10,000 |
|
(f) |
48,000 |
|
(i) |
431,000 |
|
(l) |
435,000 |
(b= ) &= nbsp; &nbs= p; &= nbsp; &nbs= p; YATES COMPANY
= &nb= sp; = Owner’s Equity Statement
= &nb= sp; For the Year Ended December 31, 2008
=
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
&nb=
sp; =
&nb=
sp;
Capital, January 1............................................... &= nbsp; &nbs= p; $ 60,000
Add: Investment................................................ $15,0= 00
&=
nbsp; Net
income..............................=
..................
&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; 110,000
Less: Drawings...................................................
Capital, December 31.........................= ................ &= nbsp; &nbs= p; $ 62,000
(c) The
sequence of preparing financial statements is income statement, owner’=
;s
equity statement, and balance sheet. The interrelationship of the ownerR=
17;s
equity statement to the other financial statements results from the fact th=
at
net income from the income statement is reported
in the owner’s equity statement and ending capital reported in the
owner’s equity statement is the amount reported for owner’s equ=
ity
on the balance sheet.
|
PROBLEM 1= -1B |
PROBLEM 1-1B (Continued)
(b) Ending capital..........................................= ................................... $16,400
Add: Drawings.................................................................= ......... 200
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp;
Deduct: Investments................................................................ = 10,000
Net income..............................= ..................................................... $ 6,600
= &nb= sp; = &nb= sp; = OR
Service revenue.............................= .......................... &= nbsp; &nbs= p; $9,500
Expenses
&= nbsp; Salaries..........................................= .................... $2,200 &= nbsp;
&= nbsp; Rent..........................................= ........................... &= nbsp; 400 &n= bsp;
&=
nbsp; Advertising..........................................=
..............
&= nbsp; &nbs= p; Net income..............................= ................... &= nbsp; &nbs= p; $6,600
|
PROBLEM 1= -2B |
PROBLEM 1-2B (Continued)
(b) = &nb= sp; CINDY BELTON, ATTORNEY AT LAW
= &nb= sp; = &nb= sp; Income Statement
= &nb= sp; For the Month Ended August 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Revenues
&= nbsp; Service revenue.............................= ................. &= nbsp; &nbs= p; $9,000
Expenses
&= nbsp; Salaries expense.............................= ............... $3,000
&= nbsp; Rent expense.............................= ...................... &= nbsp; 900
&= nbsp; Advertising expense.............................= ......... &= nbsp; 350
&= nbsp; Utilities expense.............................= ................. 250
&= nbsp; &nbs= p; Total expenses............................= ........... &= nbsp; &nbs= p; 4,500
Net income..............................= ................................. &= nbsp; &nbs= p; $4,500
= &nb= sp; = Owner’s Equity Statement
= &nb= sp; For the Month Ended August 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Cindy Belton, Capital, August 1...........= ................................... $ 6,800
Add: Net income..........................................=
............................
&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; 11,300
Less: Drawings..............................................................=
...........
Cindy Belton, Capital, August 31..........= .................................. $10,550<= /u>
PROBLEM 1-2B (Continued)
= &nb= sp; CINDY BELTON, ATTORNEY AT LAW
= &nb= sp; = &nb= sp; Balance Sheet
= &nb= sp; = &nb= sp; August 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
= &nb= sp; = &nb= sp; = Assets
Cash..........................................= ................................................... $ 2,300
Accounts receivable..........................= ....................................... &= nbsp; 6,100
Supplies..........................................= ............................................. &= nbsp; 500
Office
equipment...........................=
.............................................
&= nbsp; Total assets..............................= .......................................... $14,900<= /u>
= &nb= sp; = Liabilities and Owner’s Equity
Liabilities
&= nbsp; Notes payable.............................= ........................................ $ 2,000
&=
nbsp; Accounts
payable.............................=
.................................
&= nbsp; &nbs= p; Total liabilities.........................= ................................... &= nbsp; 4,350
Owner’s equity
&=
nbsp; Cindy
Belton, Capital.....................=
...................................
&= nbsp; &nbs= p; Total liabilities and owner’s equity= ........................ $14,900<= /u>
|
PROBLEM 1-3B |
(a) = &nb= sp; = DIVINE COSMETICS CO.
= &nb= sp; = &nb= sp; Income Statement
= &nb= sp; = For the Month Ended June 30, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Revenues
&= nbsp; Service revenue.............................= ............... &= nbsp; &nbs= p; $6,000
Expenses
&= nbsp; Supplies expense.............................= ............ = $1,600
&= nbsp; Gas and oil expense.....................= ................ &= nbsp; 800
&= nbsp; Advertising expense.............................= ....... &= nbsp; 500
&= nbsp; Utilities expense.............................= ............... = 300
&= nbsp; &nbs= p; Total expenses............................= .......... &= nbsp; 3,200
Net income..............................= ................................ &= nbsp; &nbs= p; $2,800
= &nb= sp; = Owner’s Equity Statement
= &nb= sp; = For the Month Ended June 30, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Michelle Bullock, Capital, June 1............= ........... &= nbsp; &nbs= p; $ 0
Add: Investments..........................................= ...... $26,2= 00 &= nbsp;
&=
nbsp; Net
income..............................=
....................
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp;
Less: Drawings....................................................
Michelle Bullock, Capital, June 30...........= ......... &= nbsp; &nbs= p; $27,800
= &nb= sp; = &nb= sp; Balance Sheet
= &nb= sp; = &nb= sp; June 30, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
= &nb= sp; = &nb= sp; = Assets
Cash..........................................= ................................................... $11,000
Accounts receivable..........................= ....................................... &= nbsp; 4,000
Cosmetic supplies............................= ......................................... &= nbsp; 2,000
Equipment..........................................=
.........................................
&= nbsp; Total assets..............................= .......................................... $42,000<= /u>
PROBLEM 1-3B (Continued)
= &nb= sp; = DIVINE COSMETICS CO.
= &nb= sp; = Balance Sheet (Continued)
= &nb= sp; = &nb= sp; June 30, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
= &nb= sp; = Liabilities and Owner’s Equity
Liabilities
&= nbsp; Notes payable.............................= ........................................ $13,000
&=
nbsp; Accounts
payable.............................=
.................................
&= nbsp; &nbs= p; Total liabilities.........................= ................................... 14,2= 00
Owner’s equity
&=
nbsp; Michelle
Bullock, Capital....................=
..............................
&= nbsp; &nbs= p; Total liabilities and owner’s equity= ........................ $42,000<= /u>
(b= ) &= nbsp; &nbs= p; &= nbsp; DIVINE COSMETICS CO.
= &nb= sp; = &nb= sp; Income Statement
= &nb= sp; = For the Month Ended June 30, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Revenues
&= nbsp; Service revenue ($6,000 + $800).............= ... &= nbsp; &nbs= p; $6,800
Expenses
&= nbsp; Supplies expense.............................= ............ = $1,600
&= nbsp; Gas and oil expense ($800 + $100).......= .... &= nbsp; 900
&= nbsp; Advertising expense.............................= ....... &= nbsp; 500
&= nbsp; Utilities expense.............................= ............... = 300
&= nbsp; &nbs= p; Total expenses............................= .......... &= nbsp; &nbs= p; 3,300
Net income..............................= ................................ &= nbsp; &nbs= p; $3,500
= &nb= sp; = DIVINE COSMETICS CO.
= &nb= sp; = Owner’s Equity Statement
= &nb= sp; = For the Month Ended June 30, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Michelle Bullock, Capital, June 1............= ........... &= nbsp; &nbs= p; $ 0
Add: Investments..........................................= ...... $26,2= 00 &= nbsp;
&=
nbsp; Net
income..............................=
....................
&=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp; &nbs=
p; &=
nbsp;
Less: Drawings....................................................
Michelle
Bullock, Capital, June 30...........=
......... &=
nbsp; &nbs=
p; $28,500
|
PROBLEM 1= -4B |
PROBLEM 1-4B (Continued)
(b) = &nb= sp; = GELLER CONSULTING
= &nb= sp; = &nb= sp; Income Statement
= &nb= sp; = For the Month Ended May 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Revenues
&= nbsp; Service revenue ($3,000 + $5,300)...........= ... &= nbsp; &nbs= p; $8,300
Expenses
&= nbsp; Salaries expense.............................= ............... $3,000
&= nbsp; Rent expense.............................= ...................... &= nbsp; 800
&= nbsp; Utilities expense.............................= ................. &= nbsp; 150
&= nbsp; Advertising expense.............................= ......... = 50
&= nbsp; &nbs= p; Total expenses............................= ........... &= nbsp; &nbs= p; 4,000
Net income..............................= ................................. &= nbsp; &nbs= p; $4,300
(c= ) &= nbsp; &nbs= p; &= nbsp; GE= LLER CONSULTING
= &nb= sp; = &nb= sp; Balance Sheet
= &nb= sp; = &nb= sp; May 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
= &nb= sp; = &nb= sp; = Assets
Cash..........................................= ................................................... $13,800
Accounts receivable..........................= ....................................... &= nbsp; 2,300
Supplies..........................................= ............................................. &= nbsp; 500
Office
equipment...........................=
.............................................
&= nbsp; Total assets..............................= .......................................... $19,400<= /u>
= &nb= sp; = Liabilities and Owner’s Equity
Liabilities
&= nbsp; Notes payable.............................= ........................................ $ 5,000
&=
nbsp; Accounts
payable.............................=
.................................
&= nbsp; &nbs= p; Total liabilities.........................= ................................... = 7,800
Owner’s equity
&=
nbsp; L.
Geller, Capital.....................=
............................................
= ; &n= bsp; Total liabilities and owner’s equity= ........................ $19,400<= /u>
|
PROBLEM 1-5B |
|
(a) |
McKane Company |
|
Selara Company |
|
Gordon Company |
|
Hindi Company |
||||
|
|
(a) |
$30,000 |
|
(d) |
$40,000 |
|
(g) |
$124,000 |
|
(j) |
$ 50,000 |
|
|
(b) |
95,000 |
|
(e) |
45,000 |
|
(h) |
80,000 |
|
(k) |
225,000 |
|
|
(c) |
5,000 |
|
(f) |
28,000 |
|
(i) |
413,000 |
|
(l) |
460,000 |
(b= ) &= nbsp; &nbs= p; &= nbsp; &nbs= p; McKANE COMPANY
= &nb= sp; = Owner’s Equity Statement
= &nb= sp; For the Year Ended December 31, 2008
= ; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p;
Capital, January 1...........................= ...................... &= nbsp; &nbs= p; $30,000
Add: Investment..........................................= ........ $ 5,000
&=
nbsp; Net
income..............................=
....................
&= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; 50,000
Less: Drawings....................................................
Capital,
December 31.........................=
.................. &=
nbsp; &nbs=
p; $40,000
(c) The sequence of preparing financial statement= s is income statement, owner’s equity statement, and balance sheet. The interrelationship of the owner’s equity statement to the other financ= ial statements results from the fact that net income from the income statement = is reported in the owner’s equity statement and ending capital reported in the owner’s equity statement is the amount reported for owner’s equity on the balance sh= eet.