Type:
Solution Manual
Resource:
Accounting Principles, International Student Version
Edition:
10th 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
3
6, 7, 8, 10, 11
1A, 2A, 4A, 5A
1B, 2B, 4B, 5B
4
9, 12, 13, 14, 15, 16
2A, 3A, 4A, 5A
2B, 3B, 4B, 5B
Study Objectives
Questions
Do It!
Exercises
1.
Explain what accounting is.
1, 2, 5
1
1
2.
Identify the users and uses of accounting.
3, 4
1
2
3.
Understand why ethics is a fundamental business concept.
4.
Explain generally accepted accounting principles.
6
5.
Explain the monetary unit assumption and the economic entity assumption.
7, 8, 9, 10
6.
State the accounting equation, and define its components.
11, 12, 13, 22
1, 2, 3, 4, 5
2
7.
Analyze the effects of business transactions on the accounting equation.
14, 15, 16, 18
6, 7, 8, 9
8.
Understand the four financial statements and how they are prepared.
17, 19, 20, 21
10, 11
3
1
4
4
ASSIGNMENT CHARACTERISTICS TABLE Problem Number
1-2
Description
Difficulty Level
Time Allotted (min.)
1A
Analyze transactions and compute net income.
Moderate
40–50
2A
Analyze transactions and prepare income statement, owner’s equity statement, and balance sheet.
Moderate
50–60
3A
Prepare income statement, owner’s equity statement, and balance sheet.
Moderate
50–60
4A
Analyze transactions and prepare financial statements.
Moderate
40–50
5A
Determine financial statement amounts and prepare owner’s equity statement.
Moderate
40–50
1B
Analyze transactions and compute net income.
Moderate
40–50
2B
Analyze transactions and prepare income statement, owner’s equity statement, and balance sheet.
Moderate
50–60
3B
Prepare income statement, owner’s equity statement, and balance sheet.
Moderate
50–60
4B
Analyze transactions and prepare financial statements.
Moderate
40–50
5B
Determine financial statement amounts and prepare owner’s equity statement.
Moderate
40–50
.
WEYGANDT ACCOUNTING PRINCIPLES 10E CHAPTER 1 ACCOUNTING IN ACTION Number
SO
BT
Difficulty
Time (min.)
BE1
6
AP
Simple
2–4
BE2
6
AP
Simple
3–5
BE3
6
AP
Moderate
4–6
BE4
6
AP
Moderate
4–6
BE5
6
C
Simple
2–4
BE6
7
C
Simple
2–4
BE7
7
C
Simple
2–4
BE8
7
C
Simple
2–4
BE9
7
C
Simple
1–2
BE10
8
AP
Simple
3–5
BE11
8
C
Simple
2–4
DI1
1, 2, 4
K
Simple
2–4
DI2
6
K
Simple
2–4
DI3
7
AP
Simple
6–8
DI4
8
AP
Moderate
8–10
EX1
1
C
Moderate
5–7
EX2
2
C
Simple
6–8
EX3
3
C
Moderate
6–8
EX4
4, 5
C
Moderate
6–8
EX5
6
C
Simple
4–6
EX6
6, 7
C
Simple
6–8
EX7
6, 7
C
Simple
4–6
EX8
7
AP
Moderate
12–15
EX9
8
AP
Simple
12–15
EX10
7
AP
Moderate
8–10
EX11
6, 7
AP
Moderate
6–8
EX12
8
AP
Simple
8–10
EX13
8
AN
Simple
8–10
EX14
8
AP
Simple
10–12
EX15
8
AP
Simple
6–8
EX16
8
AP
Moderate
6–8
.
1-3
ACCOUNTING IN ACTION (Continued) Number
SO
BT
Difficulty
Time (min.)
P1A
6, 7
AP
Moderate
40–50
P2A
6–8
AP
Moderate
50–60
P3A
8
AP
Moderate
50–60
P4A
6–8
AP
Moderate
40–50
P5A
7, 8
AP
Moderate
40–50
P1B
6, 7
AP
Moderate
40–50
P2B
6–8
AP
Moderate
50–60
P3B
8
AP
Moderate
50–60
P4B
6–8
AP
Moderate
40–50
P5B
7, 8
AP
Moderate
40–50
BYP1
8
AN
Simple
10–15
BYP2
8
AN, E
Simple
10–15
BYP3
9
C, AN
Simple
15–20
BYP4
8
E
Moderate
15–20
BYP5
8
E
Simple
12–15
BYP6
3
E
Simple
10–12
BYP7
3
E
Moderate
15–20
1-4
.
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.
2.
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.
3.
(a) Internal users are those who plan, organize, and run the business and therefore are officers and other decision makers. (b) To assist management, managerial 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.
4.
(a) Investors (owners) use accounting information to make decisions to buy, hold, or sell ownership shares of a company. (b) Creditors use accounting information to evaluate the risks of granting credit or lending money.
5.
No, this is incorrect. 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.
6.
Eve Myles Travel Agency should report the land at $90,000 on its December 31, 2012 balance sheet. This is true not only at the time the land is purchased, but also over the time the land is held. In determining which measurement principle to use (cost or fair value) companies weigh the factual nature of cost figures versus the relevance of fair value. In general, companies use cost. Only in situations where assets are actively traded do companies apply the fair value principle. An important concept that accountants follow is the cost principle.
7.
The monetary unit assumption requires that only transaction data that can be expressed in terms of money be included in the accounting records. This assumption enables accounting to quantify (measure) economic events.
8.
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.
9.
The three basic forms of business organizations are: (1) proprietorship, (2) partnership, and (3) corporation.
1-5
Questions Chapter 1 (Continued) 10.
One of the advantages Maria Contreras 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 and wages 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 accounting equation. (a) The death of the owner of the company is not a business transaction as it does not affect the basic accounting equation. (b) Supplies purchased on account is a business transaction as it affects the basic accounting equation. (c) An employee being fired is not a business transaction as it does not affect the basic accounting equation. (d) A withdrawal of cash from the business is a business transaction as it affects the basic accounting 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.
1-6
.
(d) Balance sheet. (e) Balance sheet and owner’s equity statement. (f) Balance sheet.
Questions Chapter 1 (Continued) 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 owner’s equity statement—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.
20.
(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
21.
Ending capital balance..................................................................................................... Beginning capital balance ...............................................................................................
22.
Coca-Cola’s accounting equation at December 31, 2009 was $48,671,000,000 = $23,325,000,000 + $25,346,000,000.
.
1-7
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 – $53,000 = $41,000 (Liabilities). BRIEF EXERCISE 1-2 (a) $120,000 + $232,000 = $352,000 (Total assets). (b) $190,000 – $91,000 = $99,000 (Total liabilities). (c) $800,000 – 0.5($800,000) = $400,000 (Owner’s equity). BRIEF EXERCISE 1-3 (a) ($800,000 + $150,000) – ($300,000 – $80,000) = $730,000 (Owner’s equity). (b) ($300,000 + $100,000) + ($800,000 – $300,000 – $70,000) = $830,000 (Assets). (c) ($800,000 – $80,000) – ($800,000 – $300,000 + $120,000) = $100,000 (Liabilities). BRIEF EXERCISE 1-4 Owner’s Equity =
(a)
X X X
= $90,000 = $90,000 = $330,000
(b)
$57,000 $57,000 X
= X + $25,000 = X + $35,000 = $22,000 ($57,000 – $35,000)
(c)
$600,000 = ($600,000 x 2/3) + X (Owner’s equity) $600,000 = $400,000 + X X = $200,000
.
+
Owner’s – Drawings + Revenues – Expenses
Assets
1-8
Liabilities
Owner’s Capital
+ $150,000 + $240,000
–
$40,000 + $450,000 – $320,000
– $7,000
+
$52,000
–
$35,000
BRIEF EXERCISE 1-5 A L A
(a) Accounts receivable (b) Salaries and wages payable (c) Equipment
A (d) Supplies OE (e) Owner’s capital L (f) Notes payable
BRIEF EXERCISE 1-6
(a) (b) (c)
Assets
Liabilities
Owner’s Equity
+ + –
+ NE NE
NE + –
Liabilities NE NE NE
Owner’s Equity + – NE
BRIEF EXERCISE 1-7 Assets + – NE
(a) (b) (c)
BRIEF EXERCISE 1-8 E R E E
(a) (b) (c) (d)
Advertising expense Service revenue Insurance expense Salaries and wages expense
D R E
(e) Owner’s drawings (f) Rent revenue (g) Utilities expense
BRIEF EXERCISE 1-9 R NOE E
.
1-9
(a) Received cash for services performed (b) Paid cash to purchase equipment (c) Paid employee salaries
BRIEF EXERCISE 1-10 GEORGE COMPANY Balance Sheet December 31, 2012 Assets Cash ................................................................................................................ Accounts receivable.................................................................................. Total assets .........................................................................................
$ 49,000 72,500 $121,500
Liabilities and Owner’s Equity Liabilities Accounts payable.............................................................................. Owner’s equity Owner’s capital................................................................................... Total liabilities and owner’s equity.....................................
$ 90,000 31,500 $121,500
BRIEF EXERCISE 1-11 BS IS OE, BS BS IS
(a) (b) (c) (d) (e)
Notes payable Advertising expense Owner’s capital Cash Service revenue SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 1-1 1. 2. 3.
4. 5.
1-10
False. The three steps in the accounting process are identification, recording, and communication. True False. Congress passed the Sarbanes-Oxley Act of 2002 to reduce unethical behavior and decrease the likelihood of future corporate scandals. False. The primary accounting standard-setting body in the United States is the Financial Accounting Standards Board (FASB). True.
.
DO IT! 1-2 1. 2. 3. 4.
Drawings is owner’s drawings (D); it decreases owner’s equity. Rent Revenue is revenue (R); it increases owner’s equity. Advertising Expense is an expense (E); it decreases owner’s equity. When the owner puts personal assets into the business, it is investment by owner (I); it increases owner’s equity.
DO IT! 1-3 Assets Cash (1) (2) +$20,000 (3) (4) –$ 3,600
= Liabilities +
Accounts Accounts + Receivable = Payable +
Owner’s Equity Owner’s Capital
–
Owner’s Drawings
+$20,000 –$20,000
+ Revenues – Expenses +$20,000
+$2,300
–$2,300 –$3,600
DO IT! 1-4 (a) The total assets are $47,000, comprised of Cash $4,500, Accounts Receivable $13,500, and Equipment $29,000. (b) Net income is $18,500, computed as follows: Revenues Service revenue .......................................................... Expenses Salaries and wages expense .................................. Rent expense ............................................................... Advertising expense ................................................. Total expenses .................................................. Net income.............................................................................
.
1-11
$51,500 $16,500 10,500 6,000 33,000 $18,500
DO IT! 1-4 (Continued) (c) The ending owner’s equity balance of Lance Company is $19,000. By rewriting the accounting equation, we can compute Owner’s Equity as Assets minus Liabilities, as follows: Total assets [as computed in (a)]................................... Less: Liabilities Notes payable .............................................................. Accounts payable....................................................... Owner’s equity......................................................................
$47,000 $25,000 3,000
28,000 $19,000
Note that it is not possible to determine the company’s owner’s equity in any other way, because the beginning balance for owner’s equity is not provided.
1-12
.
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
1-13
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?
EXERCISE 1-3 Lovie Smith, president of Smith Company, instructed Michelle Martz, the head of the accounting department, to report the company’s land in their accounting reports at its fair 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 faithfully representative and can be objectively measured and verified. In this case, the cost principle should be used and Land reported at $100,000, not $170,000. The stakeholders include stockholders and creditors of Smith Company, potential stockholders and creditors, other users of Smith’s accounting reports, Lovie Smith, and Michelle Martz. All users of Smith’s accounting reports could be harmed by relying on information that may be unreliable. Lovie Smith could benefit if the company is able to attract more investors, but would be harmed if the inappropriate reporting is discovered. Similarly, Michelle Martz could benefit by pleasing her boss, but would be harmed if the inappropriate reporting is discovered. Michelle’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 may mislead many people who rely on Smith’s accounting reports to make financial decisions. Michelle should report the land at its cost of $100,000. She should try to convince Lovie Smith that this is the appropriate course of action, but be prepared to resign her position if Smith insists.
EXERCISE 1-4 1.
Incorrect. The cost principle requires that assets (such as buildings) be recorded and reported at their cost.
2.
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.
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.
1-14
.
EXERCISE 1-5 Asset
Liability Accounts payable Notes payable Salaries and wages payable
Cash Equipment Supplies Accounts receivable
Owner’s Equity Owner’s 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.
(c) (d) (a) (b)
5. 6. 7. 8.
(d) (b) (e) (f)
EXERCISE 1-8 (a) 1. 2. 3. 4. 5.
.
1-15
Owner invested $15,000 cash in the business. Purchased equipment for $5,000, paying $2,000 in cash and the balance of $3,000 on account. Paid $750 cash for supplies. Earned $8,500 in revenue, receiving $4,600 cash and $3,900 on account. Paid $1,500 cash on accounts payable.
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 and wages of $4,800. Incurred $500 of utilities expense on account.
(b) Investment ............................................................................................. Service revenue ................................................................................... Drawings................................................................................................. Rent expense ........................................................................................ Salaries and wages expense ........................................................... Utilities expense................................................................................... Increase in owner’s equity ...............................................................
$15,000 8,500 (2,000) (650) (4,800) (500) $15,550
(c) Service revenue ................................................................................... Rent expense ........................................................................................ Salaries and wages expense ........................................................... Utilities expense................................................................................... Net income.............................................................................................
$8,500 (650) (4,800) (500) $2,550
EXERCISE 1-9 MARK KOTSAY & CO. Income Statement For the Month Ended August 31, 2012 Revenues Service revenue ................................................................... Expenses Salaries and wages expense ........................................... Rent expense ........................................................................ Utilities expense................................................................... Total expenses ............................................................ Net income......................................................................................
1-16
.
$8,500 $4,800 650 500 5,950 $2,550
EXERCISE 1-9 (Continued) MARK KOTSAY & CO. Owner’s Equity Statement For the Month Ended August 31, 2012 Owner’s capital, August 1 .................................................... Add: Investments ................................................................. Net income ...................................................................
$ $15,000 2,550
Less: Drawings....................................................................... Owner’s capital, August 31..................................................
0
17,550 17,550 2,000 $15,550
MARK KOTSAY & CO. Balance Sheet August 31, 2012 Assets Cash................................................................................................................. Accounts receivable .................................................................................. Supplies ......................................................................................................... Equipment ..................................................................................................... Total assets..........................................................................................
$ 8,350 3,450 750 5,000 $17,550
Liabilities and Owner’s Equity Liabilities Accounts payable .............................................................................. Owner’s equity Owner’s capital ................................................................................... Total liabilities and owner’s equity .....................................
$ 2,000 15,550 $17,550
EXERCISE 1-10 (a) Owner’s equity—12/31/11 ($400,000 – $250,000)..................... Owner’s equity—1/1/11 .................................................................... Increase in owner’s equity .............................................................. Add: Drawings .................................................................................. Net income for 2011 ..........................................................................
.
1-17
$150,000 100,000 50,000 15,000 $ 65,000
EXERCISE 1-10 (Continued) (b) Owner’s equity—12/31/12 ($460,000 – $300,000) .................. Owner’s equity—1/1/12—see (a)................................................. Increase in owner’s equity ........................................................... Less: Additional investment....................................................... Net loss for 2012 ..............................................................................
$160,000 150,000 10,000 45,000 $ 35,000
(c) Owner’s equity—12/31/13 ($590,000 – $400,000) .................. Owner’s equity—1/1/13—see (b) ................................................ Increase in owner’s equity ........................................................... Less: Additional investment.......................................................
$190,000 160,000 30,000 15,000 15,000 25,000 $ 40,000
Add: Drawings ............................................................................... Net income for 2013........................................................................
EXERCISE 1-11 (a) Total assets (beginning of year)................................................. Total liabilities (beginning of year) ............................................ Total owner’s equity (beginning of year).................................
$110,000 85,000 $ 25,000
(b) Total owner’s equity (end of year) ............................................. Total owner’s equity (beginning of year)................................. Increase in owner’s equity ...........................................................
$ 40,000 25,000 $ 15,000
Total revenues .................................................................................. Total expenses ................................................................................. Net income.........................................................................................
$215,000 175,000 $ 40,000
Increase in owner’s equity .................................. Less: Net income................................................... Add: Drawings ...................................................... Additional investment ...........................................
$ 15,000 $(40,000) 29,000)
(c) Total assets (beginning of year)................................................. Total owner’s equity (beginning of year)................................. Total liabilities (beginning of year) ............................................
1-18
.
(11,000) $ 4,000 $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 60,000 $ 40,000
Increase in owner’s equity ................................... Less: Net income ................................................... Additional investment .............................. Drawings ....................................................................
$ 50,000 $(40,000) (25,000)
(65,000) $ 15,000
EXERCISE 1-12 JAKE PEAVY CO. Income Statement For the Year Ended December 31, 2012 Revenues Service revenue .............................................................. Expenses Salaries and wages expense...................................... Rent expense................................................................... Utilities expense ............................................................. Advertising expense ..................................................... Total expenses ....................................................... Net income ................................................................................
$63,600 $29,500 10,400 3,100 1,800 44,800 $18,800
JAKE PEAVY CO. Owner’s Equity Statement For the Year Ended December 31, 2012 Owner’s capital, January 1......................................................................... Add: Net income ......................................................................................... Less: Drawings ............................................................................................. Owner’s capital, December 31 ..................................................................
.
1-19
$48,000 18,800 66,800 6,000 $60,800
EXERCISE 1-13 SAJUKI COMPANY Balance Sheet December 31, 2012 Assets Cash ................................................................................................................ Accounts receivable.................................................................................. Supplies......................................................................................................... Equipment..................................................................................................... Total assets .........................................................................................
$15,000 9,500 8,000 46,000 $78,500
Liabilities and Owner’s Equity Liabilities Accounts payable.............................................................................. Owner’s equity Owner’s capital ($67,500 – $10,000) ............................................ Total liabilities and owner’s equity.....................................
$21,000 57,500 $78,500
EXERCISE 1-14 (a) Camping fee revenues ..................................................................... General store revenues ................................................................... Total revenue ............................................................................. Expenses.............................................................................................. Net income........................................................................................... (b)
DEER PARK Balance Sheet December 31, 2012 Assets Cash ....................................................................................................... Supplies ................................................................................................ Equipment............................................................................................ Total assets ................................................................................
1-20
$140,000 65,000 205,000 150,000 $ 55,000
.
$ 23,000 17,500 105,500 $146,000
EXERCISE 1-14 (Continued) DEER PARK Balance Sheet (Continued) December 31, 2012 Liabilities and Owner’s Equity Liabilities Notes payable............................................................................. Accounts payable ..................................................................... Total liabilities ................................................................... Owner’s equity Owner’s capital ($146,000 – $71,000).................................. Total liabilities and owner’s equity.............................
$ 60,000 11,000 71,000 75,000 $146,000
EXERCISE 1-15 J.J. PUTZ CRUISE COMPANY Income Statement For the Year Ended December 31, 2012 Revenues Ticket revenue............................................................ Expenses Salaries and wages expense................................. Maintenance and repairs expense....................... Advertising expense ................................................ Supplies expense...................................................... Total expenses .................................................. Net income ...........................................................................
$410,000 $142,000 95,000 24,500 10,000 271,500 $138,500
EXERCISE 1-16 SERGIO SANTOS, ATTORNEY Owner’s Equity Statement For the Year Ended December 31, 2012 Owner’s capital, January 1............................................................... Add: Net income ............................................................................... Less: Drawings ................................................................................... Owner’s capital, December 31 ........................................................
.
1-21
$ 34,000 (a) 124,000 (b) 158,000 90,000 $ 68,000 (c)
EXERCISE 1-16 (Continued) Supporting Computations (a) Assets, January 1, 2012................................................................... Liabilities, January 1, 2012 ............................................................. Capital, January 1, 2012 ..................................................................
$ 96,000 62,000 $ 34,000
(b) Legal service revenue ...................................................................... Total expenses ................................................................................... Net income...........................................................................................
$335,000 211,000 $124,000
(c) Assets, December 31, 2012 ............................................................ Liabilities, December 31, 2012....................................................... Capital, December 31, 2012............................................................
$168,000 100,000 $ 68,000
1-22
.
Copyright © 2011 John Wiley & Sons, Inc.
4,100
+
9,200
–1,000
–170
7,030
9. +
+
Weygandt, Accounting Principles, 10/e, Solutions Manual
+120
7,030 +
+$ 7,150 +
11. –
+
10. +000,000
7,200
+
8. + –2,000
7.
+ 10,200
6. – +6,100
+
5. +000,000
4,100
+
4,600
+
–500
–400
3. +
4. +
5,000
+
2. + –5,000
+ +$500 +
+ + 500 +
+0000
$13,280
+$630
+–120
+ 750
+$750
+ + 500 +
+0000
+ + 500 +
+0000
+ + 500 +
+0000
+ + 500 +
+0000
+ + 500 +
+0000
+ + 500 +
+$500
+
+
+$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
+$250
10,000
–
10,000
+
10,000
+000,000
10,000
–1,000
$13,280
+ +$10,000 – $1,000 +
+ + 10,000
–
$6,850
6,850
+750
–
$2,820
–2,820
–2,820 6,100
+ + 10,000
–1,000
–170
+
6,100
–2,650 –1,000
–650
+ + 10,000
6,100
–650
–2,000
–1,000
–$1,000
6,100
+$6,100
–650
–250
–400
–400
–$400
+
+ + 10,000
+
+
+
+
+
+ + 10,000
+000,000
+ 10,000
+ 10,000
=
+$10,000
Cash
Owner’s Equity Accounts Accounts Owner’s Owner’s + Receivable + Supplies + Equipment = Payable + Capital – Drawings + Revenues – Expenses
THREETS’ REPAIR SHOP
1. +$10,000
(a)
SOLUTIONS TO PROBLEMS PROBLEM 1-1A
(For Instructor Use Only)
1-23
PROBLEM 1-1A (Continued) (b) Service revenue ($6,100 + $750) ................................. Expenses Salaries and wages ................................................ Rent ............................................................................. Advertising................................................................ Utilities ....................................................................... Net income .......................................................
1-24
.
$6,850 $2,000 400 250 170
2,820 $4,030
Copyright © 2011 John Wiley & Sons, Inc.
8.
7.
6.
5.
4.
3.
Weygandt, Accounting Principles, 10/e, Solutions Manual
$14,950 +
+10,000
4,950 +
000,000
4,950 +
–3,050
8,000 +
–1,100
9,100 +
+2,500
6,600 +
–800
7,400 +
+1,300
6,100 +
–2,900
1.
2.
RAMONA CASTRO, VETERINARIAN
+
+
+
+
+
+
+
+
+
$29,350
$5,700
5,700
00,000
5,700
00,000
5,700
00,000
5,700
+5,300
400
00,000
400
–1,300
1,700
00,000
$1,700
$600
600
0000
600
0000
600
0000
600
0000
600
0000
600
0000
600
0000
$600
+
+
+
+
+
+
+
+
+
$ 8,100
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 = +$10,000 +
=
=
=
=
=
=
=
=
$2,170
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
+
+
+
+
+
+
+
+
+
Accounts Notes Accounts + Receivable + Supplies + Equipment = Payable + Payable +
$ 9,000 +
Cash
Bal.
(a)
$13,700
13,700
13,700
13,700
13,700
13,700
000,000
13,700
000,000
13,700
000,000
$13,700
–
$1,100
–1,100
–1,100
–1,100
–$1,100
$29,350
Owner’s Capital
+
$7,800
7,800
7,800
7,800
7,800
+$7,800
–
$3,220
–3,220
–170
–3,050
–450
–900
–$1,700
Owner’s Equity Owner’s – Drawings + Revenues – Expenses
PROBLEM 1-2A
(For Instructor Use Only)
1-25
PROBLEM 1-2A (Continued) (b)
RAMONA CASTRO, VETERINARIAN Income Statement For the Month Ended September 30, 2012 Revenues Service revenue........................................................... Expenses Salaries and wages expense .................................. Rent expense ............................................................... Advertising expense.................................................. Utilities expense.......................................................... Total expenses ................................................... Net income.............................................................................
$7,800 $1,700 900 450 170 3,220 $4,580
RAMONA CASTRO, VETERINARIAN Owner’s Equity Statement For the Month Ended September 30, 2012 Owner’s capital, September 1 ......................................................... Add: Net income................................................................................ Less: Drawings ................................................................................... Owner’s capital, September 30 .......................................................
1-26
.
$13,700 4,580 18,280 1,100 $17,180
PROBLEM 1-2A (Continued) RAMONA CASTRO, VETERINARIAN Balance Sheet September 30, 2012 Assets Cash......................................................................................................... Accounts receivable........................................................................... Supplies.................................................................................................. Equipment ............................................................................................. Total assets ..................................................................................
$14,950 5,700 600 8,100 $29,350
Liabilities and Owner’s Equity Liabilities Notes payable.............................................................................. Accounts payable ...................................................................... Total liabilities .................................................................... Owner’s equity Owner’s capital ........................................................................... Total liabilities and owner’s equity..............................
.
1-27
$10,000 2,170 12,170 17,180 $29,350
PROBLEM 1-3A
(a)
AJ FLYING SCHOOL Income Statement For the Month Ended May 31, 2012 Revenues Service revenue.................................................... Expenses Gasoline expense ................................................ Rent expense ........................................................ Advertising expense........................................... Insurance expense .............................................. Maintenance and repairs expense ................. Total expenses ............................................ Net income......................................................................
$8,100 $2,500 1,200 600 400 400 5,100 $3,000
AJ FLYING SCHOOL Owner’s Equity Statement For the Month Ended May 31, 2012 Owner’s capital, May 1................................................ Add: Investments....................................................... Net income.........................................................
$ $40,000 3,000
Less: Drawings ............................................................ Owner’s capital, May 31..............................................
0
43,000 43,000 1,500 $41,500
AJ FLYING SCHOOL Balance Sheet May 31, 2012 Assets Cash ......................................................................................................... Accounts receivable ........................................................................... Equipment.............................................................................................. Total assets .................................................................................. 1-28
.
$ 3,400 4,900 64,000 $72,300
PROBLEM 1-3A (Continued) AJ FLYING SCHOOL Balance Sheet (Continued) May 31, 2012 Liabilities and Owner’s Equity Liabilities Notes payable.............................................................................. Accounts payable ...................................................................... Total liabilities .................................................................... Owner’s equity Owner’s capital ........................................................................... Total liabilities and owner’s equity.............................. (b)
$30,000 800 30,800 41,500 $72,300
AJ FLYING SCHOOL Income Statement For the Month Ended May 31, 2012 Revenues Service revenue ($8,100 + $900)..................... Expenses Gasoline expense ($2,500 + $1,500).............. Rent expense ........................................................ Advertising expense .......................................... Insurance expense.............................................. Maintenance and repair expense................... Total expenses ............................................ Net income......................................................................
$9,000 $4,000 1,200 600 400 400 6,600 $2,400
AJ FLYING SCHOOL Owner’s Equity Statement For the Month Ended May 31, 2012 Owner’s capital, May 1 ............................................... Add: Investments....................................................... Net income........................................................ Less: Drawings............................................................ Owner’s capital, May 31.............................................
.
1-29
$ $40,000 2,400
0
42,400 42,400 1,500 $40,900
1-30
Copyright © 2011 John Wiley & Sons, Inc.
$10,000) (2,000) (500)
June 1 2 3 5 9 12 15 17 20 23 26 29 30
=
Liabilities
BECKHAM DELIVERIES +
Owner’s Equity
(1,250)
($4,400)
+
$150
$150
(600)
($10,000 )
+ $12,000 = ($9,400) +
$12,000
($150)
) (200)
( 200)
($150)
()
)
+ ( $10,000) –
(
($10,000)
$200
($200)
+
$5,700
1,300
$4,400
–
(1,000) $1,950
(250)
(200)
($500)
EquipNotes Accounts Owner’s Owner’s Accounts + Receivable +Supplies + ment = Payable + Payable + Capital – Drawings + Revenues – Expenses
Assets
1,300) (600) (250) (200) (1,000) ( $ 7,800) + ($3,150)
1,250)
(200)
Cash
Date
(a)
PROBLEM 1-4A
Weygandt, Accounting Principles, 10/e, Solutions Manual
(For Instructor Use Only)
PROBLEM 1-4A (Continued) (b)
BECKHAM DELIVERIES Income Statement For the Month Ended June 30, 2012 Revenues Service revenue ($4,400 + $1,300) ...................... Expenses Salaries and wages expense................................ Rent expense ............................................................. Utilities expense ....................................................... Gasoline expense..................................................... Total expenses ................................................. Net income...........................................................................
(c)
$5,700 $1,000 500 250 200 1,950 $3,750
BECKHAM DELIVERIES Balance Sheet June 30, 2012 Assets Cash......................................................................................................... Accounts receivable........................................................................... Supplies.................................................................................................. Equipment ............................................................................................. Total assets ..................................................................................
$ 7,800 3,150 150 12,000 $23,100
Liabilities and Owner’s Equity Liabilities Notes payable.............................................................................. Accounts payable ...................................................................... Total liabilities .................................................................... Owner’s equity Owner’s capital ........................................................................... Total liabilities and owner’s equity.............................. *($10,000 + $3,750 – $200)
.
1-31
$ 9,400 150 9,550 13,550* $23,100
PROBLEM 1-5A
(a)
Alexei Company (a) $ 45,000 (b) 118,000 (c) 13,000
(b)
Ramirez Company (d) $50,000 (e) 66,000 (f) 44,000
Dayan Company (g) $120,000 (h) 70,000 (i) 431,000
Viciedo Company (j) $ 80,000 (k) 242,000 (l) 443,000
RAMIREZ COMPANY Owner’s Equity Statement For the Year Ended December 31, 2012 Owner’s capital, January 1....................................... Add: Investment........................................................ Net income....................................................... Less: Drawings .......................................................... Owner’s capital, December 31................................
$ 60,000 $15,000 35,000
50,000 110,000 44,000 $ 66,000
(c) The sequence of preparing financial statements is income statement, owner’s equity statement, and balance sheet. The interrelationship of the owner’s equity statement to the other financial 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 sheet.
1-32
.
–600
Copyright © 2011 John Wiley & Sons, Inc.
–800
+$7,000
+00,000
+0000
+0000
+00,000
+0000
+ + 800 + + 3,000 = + 700 +
+$800
+$700
+ + 3,000 = + 700 +
+00,000
+ + 3,000 =
+$3,000
=
–500
+ 0,000
+0000
+00,000
+0000
–500
+ 0,000
+0000
+00,000
Weygandt, Accounting Principles, 10/e, Solutions Manual
+ 0,000
+0000
+00,000
+–4,000
+
+
200
+0000
200
+–500
$20,900
+$14,100 + +$3,000 + +$800 + +$3,000 = +$200 +
10. – +4,000
+ 10,100 + + 7,000 + + 800 + + 3,000 =
9. + –2,500
+ 12,600 + + 7,000 + + 800 + + 3,000 =
8. +
+ 13,100 + + 7,000 + + 800 + + 3,000 = + 700 +
7. +
+ 13,600 + + 7,000 + + 800 + + 3,000 = + 700 +
6. – +3,000
+ 10,600
5. +
+ 11,400
4. +000,000
+ 11,400
3. + –3,000
+ 14,400
2. +
+$15,000
+ 15,000
+ 15,000
+000,000
+ 15,000
+
+ 15,000
–
+ 15,000
+000,000
+ 15,000
+
+ 15,000
+000,000
+ 15,000
+
+ 15,000
=
+ 15,000
Owner’s Capital +$15,000
Accounts Accounts Cash + Receivable + Supplies + Equipment = Payable +
VINCE’S TRAVEL AGENCY
1. +$15,000
(a)
–
–
$20,900
$500
–500
–500
–500
–$500
+
Drawings +
Owner’s
$10,000 –
10,000
10,000
10,000
10,000
+$10,000
Revenues –
Owner’s Equity
$3,800
–3,800
–2,500
–1,300
–1,300
–1,300
–1,300
–1,300
–700
–600
–600
–$600
Expenses
PROBLEM 1-1B
(For Instructor Use Only)
1-33
PROBLEM 1-1B (Continued) (b) Service revenue ............................................................... Expenses Salaries and wages ................................................ Rent ............................................................................. Advertising................................................................ Net income .......................................................
1-34
.
$10,000 $2,500 600 700
3,800 $ 6,200