Type:
Solution Manual
Resource:
Financial Accounting, IFRS Edition
Edition:
2nd Edition
Author(s):
Jerry J. Weygandt Paul D. Kimmel Donald E. Kieso
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
8, 9, 12, 13, 2A, 3A, 14, 15, 16, 17 4A, 5A
2B, 3B, 4B, 5B
Learning 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 accounting standards and the measurement 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, 14, 22
1, 2, 3, 4, 5, 8, 9
2
7.
Analyze the effects of business transactions on the accounting equation.
15, 16
6, 7
8.
Understand the four financial statements and how they are prepared.
17, 18, 19, 20, 21
10, 11
3
1
4
4
.
1-1
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, retained earnings statement, and statement of financial position.
Moderate
50–60
3A
Prepare income statement, retained earnings statement, and statement of financial position.
Moderate
50–60
4A
Analyze transactions and prepare financial statements.
Moderate
40–50
5A
Determine financial statement amounts and prepare retained earnings statement.
Moderate
40–50
1B
Analyze transactions and compute net income.
Moderate
40–50
2B
Analyze transactions and prepare income statement, retained earnings statement, and statement of financial position.
Moderate
50–60
3B
Prepare income statement, retained earnings statement, and statement of financial position.
Moderate
50–60
4B
Analyze transactions and prepare financial statements.
Moderate
40–50
5B
Determine financial statement amounts and prepare retained earnings statement.
Moderate
40–50
.
WEYGANDT FINANCIAL ACCOUNTING, IFRS Version, 2e CHAPTER 1 ACCOUNTING IN ACTION Number
LO
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
K
Simple
2–4
BE6
7
C
Simple
2–4
BE7
7
C
Simple
2–4
BE8
6
C
Simple
2–4
BE9
6
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, 8
AP
Moderate
12–15
EX9
8
AP
Simple
12–15
EX10
8
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
EX17
8
AP
Moderate
8–10
.
1-3
ACCOUNTING IN ACTION (Continued) Number
LO
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
3
C
Simple
15–20
BYP4
8
E
Moderate
15–20
BYP5
8
E
Simple
12–15
BYP6
3
E
Simple
10–12
1-4
.
Learning Objective
Knowledge Comprehension
1. Explain what accounting is.
DI1-1
Q1-1 Q1-2
Q1-5 E1-1
2. Identify the users and uses of accounting.
DI1-1
Q1-3 Q1-4
E1-2
3. Understand why ethics is a fundamental business concept.
Application
Analysis
Synthesis
Evaluation
E1-3
.
4. Explain accounting standards and the measurement principles.
DI1-1
Q1-6 E1-4
5. Explain the monetary unit assumption and the economic entity assumption.
Q1-7 Q1-8 Q1-9 Q1-10
E1-4
6. State the accounting equation, and define its components.
Q1-11 Q1-12 Q1-13 DI1-2 BE1-5
Q1-11 Q1-14 BE1-8 BE1-9 E1-5
E1-6 E1-7
Q1-22 BE1-1 BE1-2 BE1-3 BE1-4 E1-11
P1-1A P1-2A P1-4A P1-1B P1-2B P1-4B
7. Analyze the effects of business transactions on the accounting equation.
Q1-15 Q1-16 BE1-6 BE1-7
E1-6 E1-7
DI1-3 E1-8 E1-11 P1-1A P1-2A
P1-4A P1-5A P1-1B P1-2B P1-4B P1-5B
8. Understand the four financial statements and how they are prepared.
Q1-17 Q1-18 Q1-19 Q1-20 BE1-11
Q1-21 BE1-10 DI1-4 E1-8 E1-9 E1-10 E1-12 E1-14 E1-15 E1-16
E1-17 P1-2A P1-3A P1-4A P1-5A P1-2B P1-3B P1-4B P1-5B
Broadening Your Perspective
Real–World Focus
E1-13
Financial Reporting Comparative Analysis
1-5
Comparative Analysis Decision–Making Across the Organization Communication Activity Ethics Case
BLOOM’ S TAXONOMY TABLE
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems
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, 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 shares. (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.
Jackie Remmers Travel Agency should report the land at $85,000 on its December 31, 2014 statement of financial position. 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 extensively. An important concept that accountants follow is the historical cost principle.
7.
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.
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.
1-6
.
Questions Chapter 1 (Continued) 10.
One of the advantages Teresa Alvarez would enjoy is that ownership of a corporation is represented by transferable shares. This would allow Teresa to raise money easily by selling a part of her ownership in the company. Another advantage is that because holders of the shares (shareholders) 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 + Equity.
12.
(a) Assets are resources owned by a business. Liabilities are claims against assets. Put more simply, liabilities are existing debts and obligations. Equity is the ownership claim on total assets. (b) Equity is affected by shareholders’ investments, dividends, 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 equation. (a) No, the death of the president of the company is not a business transaction as it does not affect the basic equation. (b) Yes, supplies purchased on account is a business transaction as it affects the basic equation. (c) No, an employee being fired is not a business transaction as it does not affect the basic equation.
16.
(a) (b) (c) (d)
17.
(a) Income statement. (b) Statement of financial position. (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 equity resulting from business activities entered into for the purpose of earning income. This transaction is simply an additional investment made by one of the owners of 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 retained earnings statement—it is shown as an addition to the beginning-of-period retained earnings. Indirectly, the net income of a company is also included in the statement of financial position. It is included in the Retained Earnings account which appears in the equity section of the statement of financial position.
Decrease assets and decrease equity. Increase assets and decrease assets. Increase assets and increase equity. Decrease assets and decrease liabilities. (d) Statement of financial position. (e) Statement of financial position and retained earnings statement. (f) Statement of financial position.
.
1-7
Questions Chapter 1 (Continued) 20.
21.
22.
1-8
(a) Ending equity balance ...................................................................................... Beginning equity balance ................................................................................. Net income.......................................................................................................
$198,000 158,000 $ 40,000
(b) Ending equity balance ...................................................................................... Beginning equity balance ................................................................................. Deduct: Investment ......................................................................................... Net income.......................................................................................................
$198,000 158,000 40,000 13,000 $ 27,000
(a) Total revenues (£30,000 + £70,000) ................................................................
£100,000
(b) Total expenses (£26,000 + £40,000) ................................................................
£66,000
(c)
£100,000 66,000 £34,000
Total revenues ................................................................................................. Total expenses................................................................................................. Net income.......................................................................................................
Nestle’s accounting equation (in millions of Swiss Francs) at December 31, 2010 was CHF111,641 = CHF49,043 + CHF62,598.
.
SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 1-1 (a) ¥90,000 – ¥50,000 = ¥40,000 (Equity). (b) ¥45,000 + ¥70,000 = ¥115,000 (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) $600,000 – 0.5($600,000) = $300,000 (Equity). BRIEF EXERCISE 1-3 (a) (€870,000 + €150,000) – (€500,000 – €80,000) = €600,000 (Equity). (b) (€500,000 + €100,000) + (€870,000 – €500,000 – €70,000) = €900,000 (Assets). (c) (€870,000 – €80,000) – (€870,000 – €500,000 + €120,000) = €300,000 (Liabilities). BRIEF EXERCISE 1-4 Equity Liabilities
Share + Capital— Ordinary
Retained Earnings + Revenues – Expenses – Dividends
+ £150,000 + £240,000
+ £450,000 – £320,000 –
£40,000
–
£7,000
Assets
=
(a)
X X X
= £90,000 = £90,000 = £330,000
(b)
£57,000 £57,000 X
= X + £23,000 = X + £31,000 = £26,000 (£57,000 – £31,000)
(c)
£600,000 = (£600,000 x 2/3) + X (Equity) £600,000 = £400,000 + X X = £200,000 .
+ £50,000
£35,000 –
1-9
BRIEF EXERCISE 1-5 A L A
(a) Accounts receivable (b) Salaries and wages payable (c) Equipment
A E L
(d) Supplies (e) Share Capital—Ordinary (f) Notes payable
BRIEF EXERCISE 1-6 Assets + + –
(a) (b) (c)
Liabilities + NE NE
Equity NE + –
Liabilities NE NE NE
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 D Service revenue R Insurance expense E Salaries and wages expense
(e) Dividends (f) Rent revenue (g) Utilities expense
BRIEF EXERCISE 1-9 R NE E
1-10
(a) Received cash for services performed (b) Paid cash to purchase equipment (c) Paid employee salaries
.
BRIEF EXERCISE 1-10 GRANDE COMPANY Statement of Financial Position December 31, 2014 Assets Accounts receivable ..................................................................... Cash ............................................................................................... Total assets ............................................................................
$ 72,500 44,000 $116,500
Equity and Liabilities Equity Share capital—ordinary......................................................... Liabilities Accounts payable .................................................................. Total equity and liabilities .............................................
$ 31,500 85,000 $116,500
BRIEF EXERCISE 1-11 FP IS FP FP IS RE
(a) (b) (c) (d) (e) (f)
Notes payable Advertising expense Share capital—ordinary Cash Service revenue Dividends SOLUTIONS FOR DO IT! REVIEW EXERCISES
DO IT! 1-1 1. 2. 3. 4. 5.
False. The three steps in the accounting process are identification, recording, and communication. True. True. False. The primary accounting standard-setting body in the United States is the Financial Accounting Standards Board (FASB). True.
.
1-11
DO IT! 1-2 1. 2. 3. 4.
Dividends is dividends (D); it decreases equity. Rent Revenue is revenue (R); it increases equity. Advertising Expense is an expense (E); it decreases equity. When shareholders pay cash into the business, they receive shares (I); it increases equity.
DO IT! 1-3 Assets Cash (1) (2) +R23,000 (3) (4) – R5,000
= Liabilities +
Accounts Accounts + Receivable = Payable +
Equity Share Capital
+
+ R23,000 – R23,000
Retained Earnings Revenues – Expenses – Dividends + R23,000 – R2,000
+ R2,000
– R5,000
DO IT! 1-4 (a) The total assets are R$51,500, comprised of Cash R$9,000, Accounts Receivable R$13,500, and Equipment R$29,000. (b) Net income is R$21,700, computed as follows: Revenues Service revenue ................................................. R$54,000 Expenses Salaries and wages expense ............................ R$16,500 Rent expense ..................................................... 9,800 Advertising expense ......................................... 6,000 Total expenses .......................................... 32,300 Net income ................................................................ R$21,700
1-12
.
DO IT! 1-4 (Continued) (c) The ending equity balance of Rivera Company is R$23,500. By rewriting the accounting equation, we can compute Equity as Assets minus Liabilities, as follows: Total assets [as computed in (a)] ............................. R$51,500 Less: Liabilities Notes payable ..................................................... R$25,000 Accounts payable .............................................. 3,000 28,000 Equity ......................................................................... R$23,500 Note that it is not possible to determine the company’s equity in any other way, because the beginning balance for equity is not provided.
.
1-13
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 monetary units. 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 Labor unions Securities regulator Suppliers Taxing agency
(b)
1-14
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?
.
EXERCISE 1-3 Leon Manternach, president of Manternach Company, instructed Carla Ruden, 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. Although we have an accounting system that permits various measurement approaches is cost should be used whenever there are questions regarding the reliability of a fair value. In this case, valuation of land is too subjective and therefore the cost principle should be used. The stakeholders include shareholders and creditors of Manternach Company, potential shareholders and creditors, other users of Manternach accounting reports, Leon Manternach, and Carla Ruden. All users of Manternach’s accounting reports could be harmed by relying on information that is misleading. Leon Manternach could benefit if the company is able to attract more investors, but would be harmed if the misleading reporting is discovered. Similarly, Carla Ruden could benefit by pleasing her boss, but would be harmed if the misleading reporting is discovered. In general, even though IFRS allows companies to revalue property, plant, and equipment and other long-held assets to fair value, most companies choose to use cost. Only in situations where assets are actually traded, such as investment securities, do companies apply the fair value principle extensively. Carla’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 because Leon thinks it is “probably worth” that amount and it would mislead many people who rely on Manternach’s accounting reports to make financial decisions. Carla’s should report the land at its cost of $100,000. She should try to convince Leon Manternach that this is the appropriate course of action, but be prepared to resign her position if Manternach insists. EXERCISE 1-4 1.
Correct. The fair value principle allows companies to revalue property, plant and equipment to fair value. However, most companies choose not to instead, due to reliability concerns about valuation, and negative effects on net income, most companies report property, plant and equipment at cost.
.
1-15
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.
1-16
.
EXERCISE 1-5 Asset Cash Equipment Supplies Accounts receivable
Liability Accounts payable Notes payable Salaries and wages payable
Equity Share Capital— Ordinary
EXERCISE 1-6 1. 2. 3. 4. 5. 6. 7. 8. 9.
Increase in assets and increase in equity. Decrease in assets and decrease in equity. Increase in assets and increase in liabilities. Increase in assets and increase in equity. Decrease in assets and decrease in equity. Increase in assets and decrease in assets. Increase in liabilities and decrease in equity. Increase in assets and decrease in assets. Increase in assets and increase in 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.
Shareholders 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 $9,100 in revenue, receiving $4,600 cash and $4,500 on account. Paid $1,500 cash on accounts payable.
.
1-17
EXERCISE 1-8 (Continued) 6. 7. 8. 9. 10.
Paid $2,000 cash dividends to shareholders. Paid $650 cash for rent. Collected $450 cash from clients on account. Paid salaries and wages of $3,900. Incurred $500 of utilities expense on account.
(b) Investment ............................................................................... Service revenue ...................................................................... Dividends ................................................................................ Rent expense .......................................................................... Salaries and wages expense .................................................. Utilities expense ..................................................................... Increase in equity....................................................................
$15,000 9,100 (2,000) (650) (3,900) (500) $17,050
(c) Service revenue ...................................................................... Rent expense .......................................................................... Salaries and wages expense .................................................. Utilities expense ..................................................................... Net income ..............................................................................
$9,100 (650) (3,900) (500) $4,050
EXERCISE 1-9 J. L. KANG & CO. Income Statement For the Month Ended August 31, 2014 Revenues Service revenue ........................................................ Expenses Salaries and wages expense .................................... Rent expense ............................................................ Utilities expense ....................................................... Total expenses .................................................. Net income ........................................................................
1-18
.
$9,100 $3,900 650 500 5,050 $4,050
EXERCISE 1-9 (Continued) J. L. KANG & CO. Retained Earnings Statement For the Month Ended August 31, 2014 Retained earnings, August 1 .......................................... Add: Net income ...........................................................
$
0 4,050 4,050 2,000 $ 2,050
Less: Dividends.............................................................. Retained earnings, August 31 ............................. J.L. KANG & CO. Statement of Financial Position August 31, 2014 Assets Equipment........................................................................ Supplies ........................................................................... Accounts receivable ....................................................... Cash ................................................................................. Total assets ..............................................................
$ 5,000 750 4,050 9,250 $19,050
Equity and Liabilities Equity Share capital—ordinary........................................... Retained earnings.................................................... Liabilities Accounts payable .................................................... Total equity and liabilities .................................
$15,000 2,050
$17,050 2,000 $19,050
EXERCISE 1-10 (a) Equity—12/31/13 ($400,000 – $260,000) ................................ Equity—1/1/13 ........................................................................ Increase in equity .................................................................. Add: Dividends .................................................................... Net income for 2013 ...............................................................
.
$140,000 100,000 40,000 15,000 $ 55,000
1-19
EXERCISE 1-10 (Continued) (b) Equity—12/31/14 ($480,000 – $300,000) .............................. Equity—1/1/14—see (a) ....................................................... Increase in equity................................................................. Less: Additional investment .............................................. Net loss for 2014 ..................................................................
$180,000 140,000 40,000 50,000 $(10,000)
(c) Equity—12/31/15 ($590,000 – $400,000) .............................. Equity—1/1/15—see (b) ....................................................... Increase in equity ................................................................ Less: Additional investment ..............................................
$190,000 180,000 10,000 15,000 (5,000) 30,000 $ 25,000
Add: Dividends .................................................................. Net income for 2015 .............................................................
EXERCISE 1-11 (a) Total assets (beginning of year) ......................................... Total liabilities (beginning of year) ..................................... Total equity (beginning of year) ..........................................
£ 97,000 85,000 £ 12,000
(b) Total equity (end of year) .................................................... Total equity (beginning of year) .......................................... Increase in equity.................................................................
£ 40,000 12,000 £ 28,000
Total revenues ..................................................................... Total expenses ..................................................................... Net income ...........................................................................
£215,000 175,000 £ 40,000
Increase in equity............................................ Less: Net income ........................................... Add: Dividends ............................................. Additional investment ....................................
£ 28,000 £(40,000) 24,000)
(c) Total assets (beginning of year) ......................................... Total shareholders’ equity (beginning of year) .................. Total liabilities (beginning of year) .....................................
1-20
.
(16,000) £ 12,000 £129,000 75,000 £ 54,000
EXERCISE 1-11 (Continued) (d) Total equity (end of year) .................................................... Total equity (beginning of year).......................................... Increase in equity ................................................................
£130,000 75,000 £ 55,000
Total revenues ..................................................................... Total expenses ..................................................................... Net income ...........................................................................
£100,000 55,000 £ 45,000
Increase in equity ........................................... Less: Net income ........................................... Additional investment ......................... Dividends ........................................................
£ 55,000 £(45,000) (25,000)
(70,000) £ 15,000
EXERCISE 1-12 KAREN WEIGEL CO. Income Statement For the Year Ended December 31, 2014 Revenues Service revenue .................................................... Expenses Salaries and wages expense ............................... Rent expense ........................................................ Utilities expense ................................................... Advertising expense ............................................. Total expenses .............................................. Net income ....................................................................
$62,500 $28,000 10,400 3,100 1,800 43,300 $19,200
KAREN WEIGEL CO. Retained Earnings Statement For the Year Ended December 31, 2014 Retained earnings, January 1 ......................................................... Add: Net income ........................................................................... Less: Dividends .............................................................................. Retained earnings, December 31 ...................................................
.
$48,000 19,200 67,200 5,000 $62,200
1-21
EXERCISE 1-13 SANCULI COMPANY Statement of Financial Position December 31, 2014 Assets Equipment ........................................................................ Supplies ........................................................................... Accounts receivable........................................................ Cash ................................................................................. Total assets ..............................................................
€48,000 8,000 8,500 14,000 €78,500
Equity and Liabilities Equity Share capital—ordinary ........................................... Retained earnings (€17,500 – €9,000) ..................... Liabilities Accounts payable .................................................... Total equity and liabilities................................
€50,000 8,500
€58,500 20,000 €78,500
EXERCISE 1-14 (a) Camping fee revenues ........................................................... General store revenues ......................................................... Total revenue .................................................................. Expenses ................................................................................ Net income ............................................................................. (b)
BEAR PARK Statement of Financial Position December 31, 2014 Assets Equipment .............................................................................. Supplies .................................................................................. Cash ........................................................................................ Total assets ....................................................................
1-22
$140,000 47,000 187,000 150,000 $ 37,000
.
$105,500 2,500 20,000 $128,000