Accounting Principles, 8th Edition Solution Manual by TBtutors

Type:

Solution Manual

Resource:

Accounting Principles

Edition:

8th Edition

Author(s):

Jerry J. Weygandt Donald E. Kieso Paul D. Kimmel

CHAPTER 1 Accounting in Action ASSIGNMENT CLASSIFICATION TABLE Brief Exercises

A Problems

B Problems

5, 6, 7, 11

1A, 2A 4A

1B, 2B 4B

5, 6, 7, 8

6, 7, 8, 10, 11

1A, 2A, 4A, 5A

1B, 2B, 4B, 5B

9, 10

9, 12, 13, 14, 15, 16

2A, 3A, 4A, 5A

2B, 3B, 4B, 5B

Study Objectives

Questions

Exercises

Explain what accounting is.

1, 2, 5

Identify the users and uses of accounting.

3, 4

Understand why ethics is a fundamental business concept.

Explain generally accepted accounting principles and the cost principle.

Explain the monetary unit assumption and the economic entity assumption.

7, 8, 9, 10

State the accounting equation, and define assets, liabilities, and owner’s equity.

11, 12, 13

1, 2, 3, 4

Analyze the effects of business transactions on the accounting equation.

14, 15, 16, 18

Understand the four financial statements and how they are prepared.

17, 19, 20, 21

1-1

ASSIGNMENT CHARACTERISTICS TABLE Problem Number

Description

Difficulty Level

Time Allotted (min.)

Analyze transactions and compute net income.

Moderate

40–50

Analyze transactions and prepare income statement, owner’s equity statement, and balance sheet.

Moderate

50–60

Prepare income statement, owner’s equity statement, and balance sheet.

Moderate

50–60

Analyze transactions and prepare financial statements.

Moderate

40–50

Determine financial statement amounts and prepare owner’s equity statement.

Moderate

40–50

Analyze transactions and compute net income.

Moderate

40–50

Analyze transactions and prepare income statement, owner’s equity statement, and balance sheet.

Moderate

50–60

Prepare income statement, owner’s equity statement, and balance sheet.

Moderate

50–60

Analyze transactions and prepare financial statements.

Moderate

40–50

Determine financial statement amounts and prepare owner’s equity statement.

Moderate

40–50

1-2

1-3

Explain the monetary unit assumption and the economic entity assumption.

State the accounting equation, and define assets, liabilities, and owner’s equity.

Broadening Your Perspective

Understand the four financial statements and how they are prepared.

Explain generally accepted accounting principles and the cost principle.

Understand why ethics is a fundamental business concept.

Analyze the effects of business transactions on the accounting equation.

Identify the users and uses of accounting.

Explain what accounting is.

Study Objective

Q1-13 BE1-4 E1-5

Q1-11 Q1-12

Analysis

Financial Reporting Comparative Analysis Exploring the Web

P1-2A E1-13 P1-3A P1-4A P1-5A P1-2B P1-3B P1-4B P1-5B

P1-5A P1-1B P1-2B P1-4B P1-5B

BE1-6 E1-8 BE1-7 E1-10 BE1-8 E1-11 E1-6 P1-1A E1-7 P1-2A P1-4A Q1-20 Q1-21 BE1-9 E1-9 E1-12 E1-14 E1-15 E1-16

P1-2A P1-4A P1-1B P1-2B P1-4B

Application

BE1-1 BE1-2 BE1-3 E1-11 P1-1A

E1-6 E1-7

E1-2

Q1-5 E1-1

Exploring the Web

Q1-17 Q1-19 BE1-10

Q1-14 Q1-15 Q1-16 Q1-18 BE1-5

Q1-7 Q1-10 E1-4

Q1-8 Q1-9

Q1-6 E1-4

E1-3

Q1-3 Q1-4

Q1-1 Q1-2

Knowledge Comprehension

Synthesis

All About You Comparative Analysis Decision Making Across the Organization Communication Activity Ethics Case

Evaluation

Correlation Chart between Bloom’s Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems

BLOOM’S TAXONOMY TABLE

ANSWERS TO QUESTIONS 1.

Yes, this is correct. Virtually every organization and person in our society uses accounting information. Businesses, investors, creditors, government agencies, and not-for-profit organizations must use accounting information to operate effectively.

Accounting is the process of identifying, recording, and communicating the economic events of an organization to interested users of the information. The first step of the accounting process is therefore to identify economic events that are relevant to a particular business. Once identified and measured, the events are recorded to provide a history of the financial activities of the organization. Recording consists of keeping a chronological diary of these measured events in an orderly and systematic manner. The information is communicated through the preparation and distribution of accounting reports, the most common of which are called financial statements. A vital element in the communication process is the accountant’s ability and responsibility to analyze and interpret the reported information.

(a) Internal users are those who plan, organize, and run the business and therefore are officers and other decision makers. (b) To assist management, accounting provides internal reports. Examples include financial comparisons of operating alternatives, projections of income from new sales campaigns, and forecasts of cash needs for the next year.

(a) Investors (owners) use accounting information to make decisions to buy, hold, or sell stock. (b) Creditors use accounting information to evaluate the risks of granting credit or lending money.

Bookkeeping usually involves only the recording of economic events and therefore is just one part of the entire accounting process. Accounting, on the other hand, involves the entire process of identifying, recording, and communicating economic events.

Karen Sommers Travel Agency should report the land at $90,000 on its December 31, 2008 balance sheet. An important concept that accountants follow is the cost principle. The cost principle states that assets should be recorded at their cost. Cost has an important advantage over other valuations: it is reliable. Cost can be objectively measured and can be verified.

The monetary unit assumption requires that only transaction data capable of being expressed in terms of money be included in the accounting records. This assumption enables accounting to quantify (measure) economic events.

The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owners and all other economic entities.

The three basic forms of business organizations are: (1) proprietorship, (2) partnership, and (3) corporation.

1-4

Questions Chapter 1 (Continued)

10.

One of the advantages Maria Gonzalez would enjoy is that ownership of a corporation is represented by transferable shares of stock. This would allow Maria to raise money easily by selling a part of her ownership in the company. Another advantage is that because holders of the shares (stockholders) enjoy limited liability, they are not personally liable for the debts of the corporate entity. Also, because ownership can be transferred without dissolving the corporation, the corporation enjoys an unlimited life.

11.

The basic accounting equation is Assets = Liabilities + Owner’s Equity.

12.

(a) Assets are resources owned by a business. Liabilities are claims against assets. Put more simply, liabilities are existing debts and obligations. Owner’s equity is the ownership claim on total assets. (b) Owner’s equity is affected by owner’s investments, drawings, revenues, and expenses.

13.

The liabilities are: (b) Accounts payable and (g) Salaries payable.

14.

Yes, a business can enter into a transaction in which only the left side of the accounting equation is affected. An example would be a transaction where an increase in one asset is offset by a decrease in another asset. An increase in the Equipment account which is offset by a decrease in the Cash account is a specific example.

15.

Business transactions are the economic events of the enterprise recorded by accountants because they affect the basic equation. (a) The death of the owner of the company is not a business transaction as it does not affect the basic equation. (b) Supplies purchased on account is a business transaction as it affects the basic equation. (c) An employee being fired is not a business transaction as it does not affect the basic equation. (d) A withdrawal of cash from the business is a business transaction as it affects the basic equation.

16.

(a) Decrease assets and decrease owner’s equity. (b) Increase assets and decrease assets. (c) Increase assets and increase owner’s equity. (d) Decrease assets and decrease liabilities.

17.

(a) Income statement. (b) Balance sheet. (c) Income statement.

18.

No, this treatment is not proper. While the transaction does involve a receipt of cash, it does not represent revenues. Revenues are the gross increase in owner’s equity resulting from business activities entered into for the purpose of earning income. This transaction is simply an additional investment made by the owner in the business.

19.

Yes. Net income does appear on the income statement—it is the result of subtracting expenses from revenues. In addition, net income appears in the statement of owner’s equity—it is shown as an addition to the beginning-of-period capital. Indirectly, the net income of a company is also included in the balance sheet. It is included in the capital account which appears in the owner’s equity section of the balance sheet.

(d) Balance sheet. (e) Balance sheet and owner’s equity statement. (f) Balance sheet.

1-5

Questions Chapter 1 (Continued)

20.

21.

(a) Ending capital balance ..................................................................................................... Beginning capital balance................................................................................................ Net income..........................................................................................................................

$198,000 168,000 $ 30,000

(b)

Deduct: Investment .......................................................................................................... Net income..........................................................................................................................

$198,000 168,000 30,000 13,000 $ 17,000

(a) Total revenues ($20,000 + $70,000) .............................................................................

$90,000

(b)

Total expenses ($26,000 + $40,000).............................................................................

$66,000

(c)

Total revenues ................................................................................................................... Total expenses................................................................................................................... Net income..........................................................................................................................

$90,000 66,000 $24,000

Ending capital balance ..................................................................................................... Beginning capital balance................................................................................................

1-6

SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 1-1 (a) $90,000 – $50,000 = $40,000 (Owner’s Equity). (b) $40,000 + $70,000 = $110,000 (Assets). (c) $94,000 – $60,000 = $34,000 (Liabilities).

BRIEF EXERCISE 1-2 (a) $120,000 + $232,000 = $352,000 (Total assets). (b) $190,000 – $80,000 = $110,000 (Total liabilities). (c) $800,000 – 0.5($800,000) = $400,000 (Owner’s equity).

BRIEF EXERCISE 1-3 (a) ($800,000 + $150,000) – ($500,000 – $80,000) = $530,000 (Owner’s equity). (b) ($500,000 + $100,000) + ($800,000 – $500,000 – $70,000) = $830,000 (Assets). (c) ($800,000 – $80,000) – ($800,000 – $500,000 + $120,000) = $300,000 (Liabilities).

BRIEF EXERCISE 1-4 A L A

(a) Accounts receivable (b) Salaries payable (c) Equipment

A OE L

(d) Office supplies (e) Owner’s investment (f) Notes payable

BRIEF EXERCISE 1-5

(a) (b) (c)

Assets

Liabilities

Owner’s Equity

+ + –

+ NE NE

NE + –

1-7

BRIEF EXERCISE 1-6 Assets + – NE

(a) (b) (c)

Liabilities NE NE NE

Owner’s Equity + – NE

BRIEF EXERCISE 1-7 E R E E

(a) (b) (c) (d)

Advertising expense Commission revenue Insurance expense Salaries expense

D R E

(e) Bergman, Drawing (f) Rent revenue (g) Utilities expense

BRIEF EXERCISE 1-8 R NOE E

(a) Received cash for services performed (b) Paid cash to purchase equipment (c) Paid employee salaries

BRIEF EXERCISE 1-9 LOPEZ COMPANY Balance Sheet December 31, 2008 Assets Cash ................................................................................................................ Accounts receivable .................................................................................. Total assets..........................................................................................

$ 49,000 72,500 $121,500

Liabilities and Owner’s Equity Liabilities Accounts payable .............................................................................. Owner’s equity Kim Lopez, Capital............................................................................. Total liabilities and owner’s equity .....................................

1-8

$ 90,000 31,500 $121,500

BRIEF EXERCISE 1-10 BS IS OE, BS BS IS

(a) (b) (c) (d) (e)

Notes payable Advertising expense Trent Buchanan, Capital Cash Service revenue

1-9

SOLUTIONS TO EXERCISES EXERCISE 1-1 C R C R R C C I R

Analyzing and interpreting information. Classifying economic events. Explaining uses, meaning, and limitations of data. Keeping a systematic chronological diary of events. Measuring events in dollars and cents. Preparing accounting reports. Reporting information in a standard format. Selecting economic activities relevant to the company. Summarizing economic events.

EXERCISE 1-2 (a)

Internal users Marketing manager Production supervisor Store manager Vice-president of finance External users Customers Internal Revenue Service Labor unions Securities and Exchange Commission Suppliers

(b)

I E I E I I E

Can we afford to give our employees a pay raise? Did the company earn a satisfactory income? Do we need to borrow in the near future? How does the company’s profitability compare to other companies? What does it cost us to manufacture each unit produced? Which product should we emphasize? Will the company be able to pay its short-term debts?

1-10

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 reported 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 reporting 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 financial decisions. Ron should report the land at its cost of $100,000. He should 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.

Incorrect. The cost principle requires that assets be recorded and reported at their cost.

Correct. The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money.

Incorrect. The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities.

1-11

EXERCISE 1-5 Asset Cash Cleaning equipment Cleaning supplies Accounts receivable

Liability Accounts payable Notes payable Salaries payable

Owner’s Equity Karin Meredith, Capital

EXERCISE 1-6 1. 2. 3. 4. 5. 6. 7. 8. 9.

Increase in assets and increase in owner’s equity. Decrease in assets and decrease in owner’s equity. Increase in assets and increase in liabilities. Increase in assets and increase in owner’s equity. Decrease in assets and decrease in owner’s equity. Increase in assets and decrease in assets. Increase in liabilities and decrease in owner’s equity. Increase in assets and decrease in assets. Increase in assets and increase in owner’s equity.

EXERCISE 1-7 1. 2. 3. 4.

5. 6. 7. 8.

(d) (b) (e) (f)

EXERCISE 1-8 (a) 1. 2. 3. 4. 5.

Owner invested $15,000 cash in the business. Purchased office equipment for $5,000, paying $2,000 in cash and the balance of $3,000 on account. Paid $750 cash for supplies. Earned $8,300 in revenue, receiving $4,600 cash and $3,700 on account. Paid $1,500 cash on accounts payable.

1-12

EXERCISE 1-8 (Continued) 6. 7. 8. 9. 10.

Owner withdrew $2,000 cash for personal use. Paid $650 cash for rent. Collected $450 cash from customers on account. Paid salaries of $4,900. Incurred $500 of utilities expense on account.

(b) Investment ............................................................................................. Service revenue ................................................................................... Drawings................................................................................................. Rent expense ........................................................................................ Salaries expense.................................................................................. Utilities expense................................................................................... Increase in capital ...............................................................................

$15,000 8,300 (2,000) (650) (4,900) (500) $15,250

(c) Service revenue ................................................................................... Rent expense ........................................................................................ Salaries expense.................................................................................. Utilities expense................................................................................... Net income.............................................................................................

$8,300 (650) (4,900) (500) $2,250

EXERCISE 1-9 S. MOSES & CO. Income Statement For the Month Ended August 31, 2008 Revenues Service revenue ................................................................... Expenses Salaries expense.................................................................. Rent expense ........................................................................ Utilities expense................................................................... Total expenses ............................................................ Net income......................................................................................

1-13

$8,300 $4,900 650 500 6,050 $2,250

EXERCISE 1-9 (Continued) S. MOSES & CO. Owner’s Equity Statement For the Month Ended August 31, 2008 S. Moses, Capital, August 1 ................................................ Add: Investments................................................................. Net income...................................................................

$ $15,000 2,250

Less: Drawings ...................................................................... S. Moses, Capital, August 31 ..............................................

17,250 17,250 2,000 $15,250

S. MOSES & CO. Balance Sheet August 31, 2008 Assets Cash ................................................................................................................ Accounts receivable .................................................................................. Supplies ......................................................................................................... Office equipment......................................................................................... Total assets..........................................................................................

$ 8,250 3,250 750 5,000 $17,250

Liabilities and Owner’s Equity Liabilities Accounts payable .............................................................................. Owner’s equity S. Moses, Capital................................................................................ Total liabilities and owner’s equity .....................................

$ 2,000 15,250 $17,250

EXERCISE 1-10 (a) Owner’s equity—12/31/07 ($400,000 – $250,000)..................... Owner’s equity—1/1/07 .................................................................... Increase in owner’s equity.............................................................. Add: Drawings .................................................................................. Net income for 2007 ..........................................................................

1-14

$150,000 100,000 50,000 15,000 $ 65,000

EXERCISE 1-10 (Continued) (b) Owner’s equity—12/31/08 ($460,000 – $300,000) .................. Owner’s equity—1/1/08—see (a)................................................. Increase in owner’s equity ........................................................... Less: Additional investment....................................................... Net loss for 2008 ..............................................................................

$160,000 150,000 10,000 50,000 $ 40,000

(c) Owner’s equity—12/31/09 ($590,000 – $400,000) .................. Owner’s equity—1/1/09—see (b) ................................................ Increase in owner’s equity ........................................................... Less: Additional investment.......................................................

$190,000 160,000 30,000 15,000 15,000 30,000 $ 45,000

Add: Drawings ............................................................................... Net income for 2009........................................................................

EXERCISE 1-11 (a) Total assets (beginning of year)................................................. Total liabilities (beginning of year) ............................................ Total owner’s equity (beginning of year).................................

$95,000 85,000 $10,000

(b) Total owner’s equity (end of year) ............................................. Total owner’s equity (beginning of year)................................. Increase in owner’s equity ...........................................................

$40,000 10,000 $30,000

Total revenues.................................................................................. Total expenses ................................................................................. Net income.........................................................................................

$215,000 175,000 $ 40,000

Increase in owner’s equity .................................. Less: Net income................................................... Add: Drawings ...................................................... Additional investment...........................................

$30,000 $(40,000) 24,000)

(c) Total assets (beginning of year)................................................. Total owner’s equity (beginning of year)................................. Total liabilities (beginning of year) ............................................

1-15

(16,000) $14,000 $129,000 80,000 $ 49,000

EXERCISE 1-11 (Continued) (d) Total owner’s equity (end of year).............................................. Total owner’s equity (beginning of year) ................................. Increase in owner’s equity............................................................

$130,000 80,000 $ 50,000

Total revenues .................................................................................. Total expenses.................................................................................. Net income .........................................................................................

$100,000 55,000 $ 45,000

Increase in owner’s equity................................... Less: Net income ................................................... Additional investment .............................. Drawings ....................................................................

$50,000 $(45,000) (25,000)

(70,000) $20,000

EXERCISE 1-12 LINDA STANLEY CO. Income Statement For the Year Ended December 31, 2008 Revenues Service revenue.............................................................. Expenses Salaries expense ............................................................ Rent expense................................................................... Utilities expense............................................................. Advertising expense ..................................................... Total expenses....................................................... Net income ................................................................................

$62,500 $30,000 10,400 3,100 1,800 45,300 $17,200

LINDA STANLEY CO. Owner’s Equity Statement For the Year Ended December 31, 2008 Linda Stanley, Capital, January 1............................................................ Add: Net income ......................................................................................... Less: Drawings............................................................................................. Linda Stanley, Capital, December 31 ..................................................... 1-16

$48,000 17,200 65,200 6,000 $59,200

EXERCISE 1-13 MENDEZ COMPANY Balance Sheet December 31, 2008 Assets Cash ................................................................................................................ Accounts receivable.................................................................................. Supplies......................................................................................................... Equipment..................................................................................................... Total assets .........................................................................................

$15,000 8,500 8,000 46,000 $77,500

Liabilities and Owner’s Equity Liabilities Accounts payable.............................................................................. Owner’s equity Mendez, Capital ($67,500 – $10,000) ........................................... Total liabilities and owner’s equity.....................................

$20,000 57,500 $77,500

EXERCISE 1-14 (a) Camping fee revenues ..................................................................... General store revenues ................................................................... Total revenue ............................................................................. Expenses.............................................................................................. Net income........................................................................................... (b)

$140,000 50,000 190,000 150,000 $ 40,000

DEER PARK Balance Sheet December 31, 2008 Assets Cash ....................................................................................................... Supplies................................................................................................ Equipment............................................................................................ Total assets ................................................................................

1-17

$ 23,000 2,500 105,500 $131,000

EXERCISE 1-14 (Continued) DEER PARK Balance Sheet (Continued) December 31, 2008 Liabilities and Owner’s Equity Liabilities Notes payable............................................................................. Accounts payable ..................................................................... Total liabilities ................................................................... Owner’s equity Jan Nab, Capital ($131,000 – $71,000)................................ Total liabilities and owner’s equity ............................

$ 60,000 11,000 71,000 60,000 $131,000

EXERCISE 1-15 SUMMERS CRUISE COMPANY Income Statement For the Year Ended December 31, 2008 Revenues Ticket revenue............................................................ Expenses Salaries expense ....................................................... Maintenance expense.............................................. Property tax expense............................................... Advertising expense ................................................ Total expenses.................................................. Net income ...........................................................................

$325,000 $142,000 95,000 10,000 3,500 250,500 $ 74,500

EXERCISE 1-16 KEVIN JOHNSON, ATTORNEY Owner’s Equity Statement For the Year Ended December 31, 2008 Kevin Johnson, Capital, January 1 ............................................... Add: Net income ............................................................................... Less: Drawings................................................................................... Kevin Johnson, Capital, December 31......................................... 1-18

$ 23,000 (a) 139,000 (b) 162,000 79,000 $ 83,000 (c)

EXERCISE 1-16 (Continued) Supporting Computations (a) Assets, January 1, 2008 .................................................................. Liabilities, January 1, 2008............................................................. Capital, January 1, 2008 ..................................................................

$85,000 62,000 $23,000

(b) Legal service revenue...................................................................... Total expenses ................................................................................... Net income...........................................................................................

$350,000 211,000 $139,000

(c) Assets, December 31, 2008 ............................................................ Liabilities, December 31, 2008 ...................................................... Capital, December 31, 2008............................................................

$168,000 85,000 $ 83,000

1-19

1-20

11.

10.

(a)

+$500

Supplies

Equipment

+$250

Accounts Payable +

N. Barone, Capital

–500

4,100

+ 750 +–120 +$630

6,060

+120

–

+$ 6,180 +

+$750

+000,000

6,060

$12,310

–140

+$500

+ 500

+0000

+ 500

+0000

+ 500

6,200

+ 500

+ +0000

8,200

+ –2,000

–1,000

+0000

+ 500

9,200

+0000

– +5,100 +

+ 500

4,100

+0000

+000,000 +

4,600

+ + 500

–400

+ 5,000

5,000

+$5,000

+ 5,000

+00,000

+ 5,000

+00,000

+ 5,000

+00,000

+ 5,000

+00,000

+ 5,000

+00,000

+ 5,000

+00,000

+ 5,000

+00,000

+ 5,000

+00,000

+$5,000

+ –5,000

+$250

+0250

+0000

+0250

+0000

+ 250

+0000

+ 250

+0000

+ 250

+0000

+ 250

9,600

–400

9,350

–250

9,600

–140 +750

+$12,060

+ 12,060

–

+ 11,310

+ 11,450

+ –2,000

+ 13,450

–1,000

+ 14,450

– +5,100

+000,000

$12,310

+ 10,000

+000,000

+ 10,000

Accounts Receivable +$10,000

+$10,000

Cash

BARONE REPAIR SHOP

Service Revenue

Utilities Expense

Salaries Expense

Drawings

Service Revenue

Adv. Expense

Rent Expense

Investment

SOLUTIONS TO PROBLEMS PROBLEM 1-1A

PROBLEM 1-1A (Continued) (b) Ending capital....................................................................................... Add: Drawings.................................................................................... Deduct: Investments ........................................................................ Net income.............................................................................................

$12,060 1,000 13,060 10,000 $ 3,060

OR Service revenue($5,100 + $750) .................................. Expenses Salaries ...................................................................... Rent ............................................................................. Advertising ............................................................... Utilities ....................................................................... Net income .......................................................

1-21

$5,850 $2,000 400 250 140

2,790 $3,060

1-22

Bal.

(a)

400

7,400

5,900

9,100

$5,900

$15,200 +

00,000

+10,000

5,900

5,200 +

00,000

000,000

5,900

5,200 +

00,000

–2,900

5,900

8,100 +

00,000

–1,000

+5,500

+2,500

400

6,600 +

00,000

–800

–1,300

+1,300

1,700

6,100

$1,700 00,000

$29,800

$600

0000

600

0000

600

0000

600

0000

600

0000

600

0000

600

0000

600

0000

$600

$ 8,100

000,000

8,100

000,000

8,100

000,000

8,100

000,000

8,100

000,000

8,100

+2,100

6,000

000,000

6,000

000,000

$ 6,000

+$10,000

$29,800

$2,170

00,000

2,170

+170

2,000

00,000

2,000

00,000

2,000

00,000

2,000

+1,300

700

00,000

700

–2,900

$3,600

Adv. Expense

–300

$17,630

000,000

17,630

–170

Utilities Exp.

Rent Expense

–900 17,800

Salaries Exp.

Drawings

Serv. Revenue

–1,700

20,700

–1,000

21,700

+8,000

13,700

000,000

13,700

000,000

13,700

000,000

$13,700

Notes Accounts M. Gonzalez, Payable + Payable + Capital

= +$10,000 +

Accounts Office + Receivable + Supplies + Equipment =

–2,900

$ 9,000

Cash

MARIA GONZALEZ, VETERINARIAN

PROBLEM 1-2A

PROBLEM 1-2A (Continued) (b)

MARIA GONZALEZ, VETERINARIAN Income Statement For the Month Ended September 30, 2008 Revenues Service revenue .......................................................... Expenses Salaries expense......................................................... Rent expense ............................................................... Advertising expense.................................................. Utilities expense.......................................................... Total expenses ................................................... Net income.............................................................................

$8,000 $1,700 900 300 170 3,070 $4,930

MARIA GONZALEZ, VETERINARIAN Owner’s Equity Statement For the Month Ended September 30, 2008 M. Gonzalez, Capital, September 1 ................................................ Add: Net income................................................................................ Less: Drawings ................................................................................... M. Gonzalez, Capital, September 30..............................................

1-23

$13,700 4,930 18,630 1,000 $17,630

PROBLEM 1-2A (Continued) MARIA GONZALEZ, VETERINARIAN Balance Sheet September 30, 2008 Assets Cash ......................................................................................................... Accounts receivable ........................................................................... Supplies .................................................................................................. Office equipment.................................................................................. Total assets...................................................................................

$15,200 5,900 600 8,100 $29,800

Liabilities and Owner’s Equity Liabilities Notes payable............................................................................... Accounts payable ....................................................................... Total liabilities ..................................................................... Owner’s equity M. Gonzalez, Capital................................................................... Total liabilities and owner’s equity ..............................

1-24

$10,000 2,170 12,170 17,630 $29,800

PROBLEM 1-3A

(a)

SKYLINE FLYING SCHOOL Income Statement For the Month Ended May 31, 2008 Revenues Lesson revenue.................................................... Expenses Fuel expense ......................................................... Rent expense ........................................................ Advertising expense........................................... Insurance expense .............................................. Repair expense..................................................... Total expenses ............................................ Net income......................................................................

$7,500 $2,500 1,200 500 400 400 5,000 $2,500

$ $45,000 2,500

Less: Drawings ............................................................ Jeff Wilkins, Capital, May 31.....................................

47,500 47,500 1,500 $46,000

SKYLINE FLYING SCHOOL Balance Sheet May 31, 2008 Assets Cash ......................................................................................................... Accounts receivable........................................................................... Equipment.............................................................................................. Total assets ..................................................................................

1-25

$ 5,600 7,200 64,000 $76,800

PROBLEM 1-3A (Continued) SKYLINE FLYING SCHOOL Balance Sheet (Continued) May 31, 2008 Liabilities and Owner’s Equity Liabilities Notes payable............................................................................... Accounts payable ....................................................................... Total liabilities ..................................................................... Owner’s equity Jeff Wilkins, Capital.................................................................... Total liabilities and owner’s equity ..............................

(b)

$30,000 800 30,800 46,000 $76,800

SKYLINE FLYING SCHOOL Income Statement For the Month Ended May 31, 2008 Revenues Lesson revenue ($7,500 + $900)..................... Expenses Fuel expense ($2,500 + $1,500) ...................... Rent expense........................................................ Advertising expense .......................................... Insurance expense ............................................. Repair expense .................................................... Total expenses............................................ Net income .....................................................................

$8,400 $4,000 1,200 500 400 400 6,500 $1,900

SKYLINE FLYING SCHOOL Owner’s Equity Statement For the Month Ended May 31, 2008 Jeff Wilkins, Capital, May 1....................................... Add: Investments ...................................................... Net income ....................................................... Less: Drawings ........................................................... Jeff Wilkins, Capital, May 31....................................

1-26

$ $45,000 1,900

46,900 46,900 1,500 $45,400

$10,000) (2,000) (500)

June 1 2 3 5 9 12 15 17 20 23 26 29 30

1-27

MILLER DELIVERIES

Liabilities

Owner’s Equity

($3,150)

1,500) (500) (250) (100) (1,000) ($ 8,200) +

($4,400)

$150

(500)

($10,000)

+ $12,000 = ($ 9,500) +

$12,000

($150)

) (100)

( 100)

($150)

Salaries Expense

(1,000) + ( $13,850)

Gasoline Expense Service Revenue

Rent Expense Service Revenue Drawings

Utilities Expense

(100) 1,500)

(500) 4,400) (200)

Investment

(250)

(

($10,000)

Accounts Delivery Notes Accounts M. Miller, Receivable + Supplies + Van = Payable + Payable + Capital

(1,250)

Assets

1,250)

(200)

Cash

Date

(a)

PROBLEM 1-4A

PROBLEM 1-4A (Continued) (b)

MILLER DELIVERIES Income Statement For the Month Ended June 30, 2008 Revenues Service revenue ($4,400 + $1,500) ....................... Expenses Salaries expense ....................................................... Rent expense.............................................................. Utilities expense ........................................................ Gasoline expense ..................................................... Total expenses.................................................. Net income ...........................................................................

(c)

$5,900 $1,000 500 250 100 1,850 $4,050

MILLER DELIVERIES Balance Sheet June 30, 2008 Assets Cash ......................................................................................................... Accounts receivable ........................................................................... Supplies .................................................................................................. Delivery van ........................................................................................... Total assets...................................................................................

$ 8,200 3,150 150 12,000 $23,500

Liabilities and Owner’s Equity Liabilities Notes payable............................................................................... Accounts payable ....................................................................... Total liabilities ..................................................................... Owner’s equity M. Miller, Capital .......................................................................... Total liabilities and owner’s equity ..............................

1-28

$ 9,500 150 9,650 13,850 $23,500