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Chapter 1 Problem Solutions For QuickBooks
Chapter 1 Problem Solutions For QuickBooks
(b)
(c)
Part 2
Company B:
(a) and (b)
Equity:
12/31/2004 12/31/2005
Assets................................... $35,000
$41,000
Liabilities.............................. (22,500)
(27,500)
Equity................................... $12,500
$13,500
Part 3
Company C:
First, calculate the beginning balance of equity:
Dec. 31, 2004
Assets.......................................................... $29,000
Liabilities..................................................... (14,000)
Equity.......................................................... $15,000
Next, find the ending balance of equity by completing this table:
Equity, December 31, 2004........................ $15,000
Plus owner investments............................
7,750
Plus net income..........................................
9,000
Less owners withdrawals......................... (3,875)
Equity, December 31, 2005........................ $27,875
Finally, find the ending amount of assets by adding the ending balance of
equity to the ending balance of liabilities:
Dec. 31, 2005
Liabilities..................................................... $19,000
Equity.......................................................... 27,875
Assets.......................................................... $46,875
Part 4
Company D:
First, calculate the beginning and ending owners equity balances:
12/31/2004 12/31/2005
Assets...................................... $80,000
$ 125,000
Liabilities.................................
Owners Equity.......................
Problem 1-1A (Concluded)
(38,000)
$42,000
(64,000)
$ 61,000
$7,000
Part 5
Company E:
First, compute the balance of equity as of December 31, 2005:
Assets.......................................................... $112,500
Liabilities.................................................... (75,000)
Equity.......................................................... $ 37,500
Next, find the beginning balance of equity as follows:
Equity, December 31, 2004........................ $
?
Plus owner investments............................
4,500
Plus net income.......................................... 18,000
Less owners withdrawals......................... (9,000)
Equity, December 31, 2005....................... $37,500
Thus, the beginning balance of equity was $24,000.
Finally, find the beginning amount of liabilities by subtracting the beginning
balance of equity from the beginning balance of assets:
Dec. 31, 2004
Assets.......................................................... $123,000
Equity.......................................................... (24,000)
Liabilities.................................................... $ 99,000
Transaction
1 Owner invests
cash in business
2 Receives cash
for services
provided
3 Pays cash for
employee wages
Income
Statement of
Balance Sheet
Statement
Cash Flows
Total Total Total
Net
Operating Financing Investing
Assets Liab. Equity
Income
Activities Activities Activities
+
4 Incurs legal
costs on credit
5 Borrows cash
by signing L-T
note payable
6 Owner withdraws cash
7 Buys land by
signing note
payable
8 Provides services on credit
+
+
9 Buys office
equipment
for cash
+/
10 Collects cash
on receivable
from (8)
+/
Cash
Accounts
Receivable
May 1 +$60,000
1
Liabilities +
Office
=
Equipment
Accounts
Payable
Equity
Revenues
$1,680
800
8 +
4,600
$4,600
3,000
12
15 -
850
20 +
3,000
22
25 +
2,800
26 -
1,680
$3,000
3,000
2,800
2,800
27
$3,200
800
850
60
= + $1,680
Expenses
$60,000
3,200
= -
1,680
= +
60
2,800
28 -
850
850
30 -
200
200
30 -
480
480
31 -
1,200
$6,440
$61,140 +
$1,680
60
$60,000
$1,200
$1,200
$10,400
$10,400
$3,200
1,700
60
800
200
480
6,440
$ 3,960
$10,400
(3,200)
(800)
(200)
(480)
(1,700)
(1,680)
60,000
(1,200)
$ 4,020
(1,680)
58,800
$61,140
0
$61,140
Cash
Accounts
Receivable
Office
Supplies
Office
Equipment
Dec. 1 +$56,000
2 800
Bal.
55,200
3 - 3,200
5
Bal.
900
51,100
+ 1,000
$ 900
900
52,100
900
8
52,100
Bal.
15
Bal.
20
Bal.
28 +
Bal.
29
Bal.
30
Bal.
31
Bal.
Accounts
Payable
+ C.Hamilton, - C.Hamilton, +
Capital
Withdrawals
$3,800
Revenues -
Expenses
$800
56,000
$56,000
800
$14,000
14,000
10,800 +
56,000
800
14,000
10,800
56,000
800
+
+
Equity
14,000
+ $10,800
=
+
$1,000
10,800 +
3,800
56,000
1,000
800
900
3,800
14,000
14,600
56,000
+
+
1,000
4,000
800
$4,000
52,100
4,000
+
+
900
500
3,800
14,000
14,600 +
+
500
56,000
5,000
800
52,100
4,000
1,400
3,800
14,000
15,100
56,000
5,000
800
+
+
4,000
600
1,400
3,800
14,000
3,800
11,300 +
56,000
+
+
5,000
600
800
48,300
4,000
1,400
3,800
14,000
11,300
56,000
5,600
800
4,600
4,000
52,300
600
1,400
3,800
14,000
11,300
56,000
5,600
1,200
51,100
800
1,200
600
1,400
3,800
14,000
11,300
56,000
440
50,660
600
1,400
3,800
14,000
11,300
56,000
5,600 5,600 -
3,800
48,300
24
Bal.
Liabilities
18
Bal.
Bal.
Electrical
Equipment
52,000
Bal.
700
$49,960
$ 600
$1,400
$3,800
$14,000
$11,300
$56,000
2,000
440
2,440
$700
$700 +
$5,600
$2,440
$5,600
$ 800
1,200
440
2,440
$3,160
HAMILTON ELECTRIC
Statement of Owners Equity
For Month Ended December 31
C. Hamilton, Capital, December 1.............
Plus: Owner investments
Net income.......................................
Less: Owner withdrawals..........................
C. Hamilton, Capital, December 31...........
Assets
Cash.................................
Accounts receivable.......
Office supplies................
Office equipment.............
Electrical equipment.......
Total assets.....................
$
0
56,000
3,160
59,160
700
$58,460
HAMILTON ELECTRIC
Balance Sheet
December 31
Liabilities
$49,960
Accounts payable.................... $11,300
600
1,400
Equity
3,800
14,000
C. Hamilton, Capital................. 58,460
$69,760
Total liabilities and equity....... $69,760
$ 5,000
(800)
(900)
(440)
(1,200)
(3,200)
(3,800)
56,000
(700)
$ 1,660
(7,000)
55,300
$49,960
0
$49,960
Part 4
If the December 1 owner investment had been $40,000 cash instead of
$56,000 and the $16,000 difference was borrowed by the company from a
bank, then:
(a) beginning and ending equity would be $16,000 less,
(b) total liabilities would be $16,000 greater, and
(c) total assets would remain the same.
Accounts +
Receivable
Office
Supplies
a. +$60,000
=
+
b.
- 50,000
Bal.
10,000
6,000
4,000
c.
Bal.
e.
4,000
3,000
+
$4,000
Bal.
3,000 +
4,000
g. +
Bal.
Bal.
i. +
Bal.
k.
Bal.
$4,000
4,000
Payable
$30,000
30,000 +
M.Right,
Capital
$90,000
M.Right, +
Withdrawals
Revenues
4,000
4,000
+
+
4,000
4,000
9,200 +
4,000
3,000
3,000
12,200 +
1,000
300,000 =
250,000 +
90,000
36,000 +
300,000 =
250,000 +
90,000
5,000 +
250,000 +
90,000
1,000
37,000 +
300,000 =
37,000 +
37,000 +
300,000 =
5,000 +
300,000 =
5,000 +
250,000 +
250,000 +
90,000
90,000
37,000 +
300,000 =
5,000 +
4,000
8,000
12,000
1000
12,000
1,000
1,000
1,000
5,000 +
250,000 +
4,000
37,000 +
300,000 =
5,000 +
250,000 +
90,000
1,800 +
12,000
250,000 +
90,000
1,800 +
12,000
$4,000
1,000
300,000 =
37,000 +
300,000 =
$37,000 + $300,000 =
1,000
90,000
37,000 +
$1,000
250,000 +
$1,000
$4,000
4,000
2,500
$9,200 +
4,000
+ $5,000
- $1,800
90,000 1,800 +
Expenses
6,000
500
1,000
$250,000
1,800
11,700 +
Notes
8,000
11,000 +
Bal.
f.
j.
Accounts
Payable
Equity
1,000
Bal.
h.
+ Building =
+ $300,000
d.
Bal.
Office
Equipment
Liabilities
500
4,500 +
2,500
$3,500
PepsiCo return:
3. We know that sales less expenses equal net income. Taking the
sales and net income numbers for Zia we obtain:
$455,000 - Expenses = $55,000 Expenses must equal $400,000.
4. We know from the accounting equation that total financing
(liabilities plus equity) must equal the total for assets (investing).
Since average total assets are $250,000, we know the average
total of liabilities plus equity (financing) must equal $250,000.
Return:
Risk:
4% interest or $40/year.
Very low; it is the risk of the financial
institution not paying interest and principal.
Case 2
Return:
Risk:
Case 3
Return:
Risk:
Case 4
Return:
Risk:
A
B
B
A
5.
6.
7.
8.
B
C
C
C