Solution Manual For Financial Accounting 15th Edition by Warren Complete Downloadable File at

Solution Manual for Financial Accounting 15th
Edition by Warren
Complete downloadable file at:
https://testbanku.eu/Solution-Manual-for-Financial-
Accounting-15th-Edition-by-Warren
DISCUSSION QUESTIONS
1.
Someusersofaccountinginformationincludemanagers,employees,investors,creditors,customers,a
ndthegovernment.
2.
Theroleofaccountingistoprovideinformationformanagerstouseinoperatingthebusiness.Inaddition,acco
untingprovidesinformationtootherstouseinassessingtheeconomicperformanceandconditionofthebusine
ss.
3.
Thecorporateformallowsthecompanytoobtainlargeamountsofresourcesbyissuingstock.Forthisreason,mo
stcompaniesthatrequirelargeinvestmentsinproperty,plant,andequipmentareorganizedascorporations.
4.
No.Thebusinessentityconceptlimitstherecordingofeconomicdatatotransactionsdirectlyaffectingtheact
ivitiesofthebusiness.Thepaymentoftheinterestof$4,500isapersonaltransactionofJoshReillyandshouldn
otberecordedbyDispatchDeliveryService.
5.
Thelandshouldberecordedatitscostof$167,500toReliableRepairService.Thisisconsistentwiththecostconc
ept.
6. a.
No.Theofferof$2,000,000andtheincreaseintheassessedvalueshouldnotberecognizedintheaccounting
recordsbecauselandisrecordedonthecostbasis.
b.
Cashwouldincreaseby$2,125,000,landwoulddecreaseby$900,000,andowner’sequitywouldincrease
by$1,225,000.
7.
Anaccountreceivableisaclaimagainstacustomerforgoodsorservicessold.Anaccountpayableisanamounto
wedtoacreditorforgoodsorservicespurchased.Therefore,anaccountreceivableintherecordsofthesellerisa
naccountpayableintherecordsofthepurchaser.
8. (b)Thebusinessrealizednetincomeof$91,000($679,000–$588,000).
9. (a)Thebusinessincurredanetlossof$75,000($640,000–$715,000).
1-1
© 2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Full file at https://testbanku.eu/
10. (a)Netincomeornetloss
(b) Owner’sequityattheendoftheperiod
(c) Cashattheendoftheperiod
1-2
©2018 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PRACTICEEXERCISES
PE1-1A
$380,000.Underthecostconcept,thelandshouldberecordedatthecosttoClairemontRepairService.
PE1-1B
$437,500.Underthecostconcept,thelandshouldberecordedatthecosttoHigginsRepairService.
PE1-2A
a. A = L + OE
$675,000 = $215,000 + OE
OE = $460,000
b. A = L + OE
+$112,300 = +$32,000 + OE
OE = +$80,300
OE on December 31, 2019 = $460,000 + $80,300
= $540,300
PE1-2B
a. A = L + OE
$395,000 = $97,000 + OE
OE = $298,000
b. A = L + OE
–$65,000 = +$36,000 + OE
OE = –$101,000
OE on December 31, 2019 = $298,000 – $101,000
= $197,000
PE1-3A
(2)
Asset(AccountsReceivable)increasesby$13,750;Revenue(D
eliveryServiceFees)increasesby$13,750.
(3)
Liability(AccountsPayable)decreasesby$2,500;Asset(C
ash)decreasesby$2,500.
(4) Asset(Cash)increasesby$9,000;
Asset(AccountsReceivable)decreasesby$9,000.
(5) Asset(Cash)decreasesby$1,000;
1-3
Owner'sEquity(JeromeFoley,Drawing)decreasesby$1,000.
1-4
PE1-3B
(2)
Expense(AdvertisingExpense)increasesby$4,850;Asset(
Cash)decreasesby$4,850.
(3) Asset(Supplies)increasesby$2,100;
Liability(AccountsPayable)increasesby$2,100.
(4)
Asset(AccountsReceivable)increasesby$14,700;Revenue(D
eliveryServiceFees)increasesby$14,700.
(5) Asset(Cash)increasesby$8,200;
Asset(AccountsReceivable)decreasesby$8,200.
PE1-4A
ADVENTURETRAVELSERVICE
IncomeStatement
FortheYearEndedApril30,2019
Feesearned $2,180,000
Expenses:
Wagesexpense $1,300,000
Officeexpense 400,000
Miscellaneousexpense 25,000
Totalexpenses 1,725,000
Netincome $455,000
PE1-4B
SENTINELTRAVELSERVICE
IncomeStatement
FortheYearEndedAugust31,2019
Feesearned $750,000
Expenses:
Wagesexpense $450,000
Officeexpense 295,000
Totalexpenses 757,000
Netloss $ (7,000)
1-5
PE 1-5A
StatementofOwner’sEquity
JeromeFoley,capital,May1,2018 $1,020,000
Additionalinvestmentbyownerduringyear $60,000
Netincomefortheyear 455,000
Withdrawals (40,000)
Increaseinowner’sequity 475,000
JeromeFoley,capital,April30,2019 $1,495,000
PE1-5B
BarbSchroeder,capital,September1,2018 $380,000
Additionalinvestmentbyownerduringyear $36,000
Netlossfortheyear (7,000)
BarbSchroeder,capital,August31,2019 $391,000
PE1-6A
BalanceSheet
April30,2019
Assets
Cash $197,000
Accountsreceivable 485,000
Supplies 18,000
Land 900,000
Totalassets $1,600,000
Liabilities
Accountspayable $105,000
Owner’sEquity
JeromeFoley,capital 1,495,000
Totalliabilitiesandowner’sequity $1,600,000
1-6
PE1-6B
BalanceSheetAu
gust31,2019
Assets
Cash $45,400
Supplies 4,700
Land 310,000
Totalassets $435,600
Liabilities
Owner’sEquity
BarbSchroeder,capital 391,000
Totalliabilitiesandowner’sequity $435,600
PE1-7A
StatementofCashFlows
Cashflowsfromoperatingactivities:
Cashreceiptsfromcustomers $ 2,080,000
Cashpaymentsforoperatingexpenses (1,706,000)
Netcashflowfromoperatingactivities $374,000
Cashflowsusedforinvestingactivities:
Cashpaymentforpurchaseofland (400,000)
Cashflowsfromfinancingactivities:
Cashreceiptfromownerasinvestment $ 60,000
Cashwithdrawalsbyowner (40,000)
Netcashflowfromfinancingactivities 20,000
Netdecreaseincashduringyear $ (6,000)
CashasofMay1,2018 203,000
CashasofApril30,2019 $197,000
1-7
PE1-7B
Cashreceiptfromcustomers $734,000
Cashpaymentsforoperatingexpenses (745,600)
Netcashflowusedforoperatingactivities $(11,600)
Cashreceiptfromownerasinvestment $36,000
Netdecreaseincashduringyear $(45,600)
CashasofSeptember1,2018 89,000
CashasofAugust31,2019 $43,400
PE1-8A
a.
Dec. 31, Dec. 31,
2019 2018
Total liabilities.............................................................. $547,800 $518,000
Total owner’s equity..................................................... $415,000 $370,000
Ratio of liabilities to owner’s equity........................... 1.32* 1.40**
* $547,800 ÷ $415,000
**$518,000 ÷ $370,000
PE1-8B
a. Dec. 31, Dec. 31,
2019 2018
Total liabilities................................................................ $4,085,000 $2,880,000
Total owner’s equity...................................................... $4,300,000 $3,600,000
Ratio of liabilities to owner’s equity.............................. 0.95* 0.80**
* $4,085,000 ÷ $4,300,000
** $2,880,000 ÷ $3,600,000
b. Decreased
1-8
EXERCISES
Ex.1-1
a. 1. manufacturing 6. service 11. service

2. manufacturing 7. service 12. service
3. manufacturing 8. service 13. manufacturing
4. service 9. manufacturing 14. service
5. merchandise 10. merchandise 15. merchandise
b.
Theaccountingequationisrelevanttoallofthecompanies.Itservesasthebasisoftheaccountin
ginformationsystem.
Ex.1-2
Asinmanyethicsissues,thereisnoonerightanswer.Oftentimes,disclosingonlywhatislegall
yrequiredmaynotbeenough.Inthiscase,itwouldbebestforthecompany’schiefexecutiveoffi
certodisclosebothreportstothecountyrepresentatives.Indoingso,thechiefexecutiveoffice
rcouldpointoutanyflawsordeficienciesinthefiredresearcher’sreport.
Ex.1-3
a. 1. K 5. B 9. X
2. G 6. B 10. B
3. B 7. X
4. K 8. G
b.
Abusinesstransactionisaneconomiceventorconditionthatdirectlychangesane
ntity’sfinancialconditionorresultsofoperations.
Ex.1-4
KeurigGreenMountain’sowners’equity:$4,002–$1,288=$2,714
Starbucks’owners’equity:$12,446–$6,628=$5,818
Ex.1-5
DollarTree’sowners’equity:$3,567–$1,782=$1,785
Target’sowners’equity:$41,404–$27,407=$13,997
1-9
Ex.1-6
a. $3,930,000($556,000+$3,374,000)
b. $386,200($6,111,200–$5,725,000)
c. $1,337,500($2,150,000–$812,500)
Ex.1-7
a. $540,000 ($720,000–$180,000)
b. $606,500 ($540,000+$96,500–$30,000)
c. $357,000 ($540,000–$168,000–$15,000)
d. $733,000 ($540,000+$175,000+$18,000)
e. Netincome:$120,000($880,000–$220,000–$540,000)
Ex.1-8
a. (1) asset
b. (2) liability
c. (1) asset
d. (3) owner’sequity(revenue)
e. (1) asset
f. (3) owner’sequity(expense)
g. (1) asset
Ex.1-9
a. Increasesassetsandincreasesowner’sequity.
b. Decreasesassetsanddecreasesowner’sequity.
c. Increasesassetsanddecreasesassets.
d. Increasesassetsandincreasesliabilities.
e. Increasesassetsandincreasesowner’sequity.
Ex.1-10
a. (1)Totalassetsincreased$183,000($298,000–$115,000).
(2) Nochangeinliabilities.
(3) Owner’sequityincreased$183,000.
b. (1)Totalassetsdecreased$80,000.
(2) Totalliabilitiesdecreased$80,000.
(3) Nochangeinowner’sequity.
c.
No.Itisfalsethatatransactionalwaysaffectsatleasttwoelements(Assets,Liabilities,orO
wner’sEquity)oftheaccountingequation.Sometransactionsaffectonlyoneelementoft
heaccountingequation.Forexample,purchasingsuppliesforcashonlyaffectsassets.
1-10
1-11
Ex.1-11
1. (b)decrease
2. (a)increase
3. (b)decrease
4. (a)increase
Ex.1-12
1. c 6. c
2. a 7. d
3. e 8. a
4. e 9. e
5. c 10. e
Ex.1-13
a. (1)Providedcateringservicesforcash,$71,800.
(2) Purchaseoflandforcash,$15,000.
(3) Paymentofcashforexpenses,$47,500.
(4) Purchaseofsuppliesonaccount,$1,100.
(5) Withdrawalofcashbyowner,$5,000.
(6) Paymentofcashtocreditors,$4,000.
(7) Recognitionofcostofsuppliesused,$1,500.
b. $300($40,300 – $40,000)
c. $17,800 (–$5,000+$71,800–$49,000)
d. $22,800 ($71,800–$49,000)
e. $17,800 ($22,800–$5,000)
Ex.1-14
No.Itwouldbeincorrecttosaythatthebusinesshadincurredanetlossof
$8,000.The excessofthewithdrawalsoverthenetincomefortheperiodisadecreaseinthe amountofo
wner’sequityinthebusiness.
1-12
Ex.1-15
Jupiter
Owner'sequityatendofyear($844,000–$320,000)........................................... $524,000
Deductowner'sequityatbeginningofyear($550,000–$215,000)..................... 335,000
Netincome(increaseinowner’sequity)....................................................... $189,000
Mars
Increaseinowner’sequity(asdeterminedforJupiter)...................................... $189,000
Addwithdrawals.................................................................................................... 36,000
Netincome........................................................................................................ $225,000
Saturn
Deductadditionalinvestment........................................................................... 60,000
Netincome........................................................................................................ $129,000
Venus
Deductadditionalinvestment........................................................................... 60,000
$129,000
Addwithdrawals.................................................................................................... 36,000
Netincome........................................................................................................ $165,000
Ex.1-16
Balancesheetitems:1,2,3,4,6,8,10
Ex.1-17
Incomestatementitems:5,7,9
1-13
Ex.1-18
a UDDERPRODUCTSCOMPANY
FortheMonthEndedApril30,2019
MarkKominksy,capital,April1,2019 $384,500
NetincomeforApril $166,000
MarkKominksy,capital,April30,2019 $525,500
b.
Thestatementofowner’sequityispreparedbeforetheApril30,2019,balancesheetbecaus
eMarkKominksy,CapitalasofApril30,2019,isneededforthebalancesheet.
Ex.1-19
DAIRYSERVICES
IncomeStatement
FortheMonthEndedAugust31,2019
Feesearned $783,000
Expenses:
Rentexpense 35,000
Suppliesexpense 8,500
Netincome $178,100
1-14
Ex.1-20
Ineachcase,solveforasingleunknown,usingthefollowingequation:
Owner’sEquity(beginning)+Investments–Withdrawals+Revenues–Expenses
=Owner’sEquity(ending)
Freeman
Owner’sequityatendofyear($1,260,000–$330,000)................................ $930,000
Owner’sequityatbeginningofyear($900,000–$360,000)........................ 540,000
Increaseinowner’sequity......................................................................... $390,000
Deductincreaseduetonetincome($570,000–$240,000).......................... 330,000
Increaseduetoadditionalinvestmentlesswithdrawals........................... $60,000
Addwithdrawals........................................................................................... 75,000
Additionalinvestmentinthebusiness.................................................(a) $135,000
Heyward
Owner’sequityatendofyear($675,000–$220,000).................................. $455,000
Owner’sequityatbeginningofyear($490,000–$260,000)....................... 230,000
Increaseinowner’sequity........................................................................ $225,000
Addwithdrawals.......................................................................................... 32,000
Increaseduetoadditionalinvestmentandnetincome............................ $257,000
Deductadditionalinvestment................................................................. 150,000
Increaseduetonetincome....................................................................... $107,000
Addexpenses.......................................................................................... 128,000
Revenue............................................................................................... (b) $235,000
Jones
Owner’s equity at end of year ($100,000 – $80,000).................................... $ 20,000
Owner’s equity at beginning of year ($115,000 – $81,000).......................... 34,000
Decrease in owner’s equity....................................................................... $(14,000)
Add decrease due to net loss ($115,000 – $122,500).................................. (7,500)
Decrease due to withdrawals less additional investment.......................... $ (6,500)
Deduct additional investment................................................................... 10,000
Withdrawals from the business...........................................................(c) $(16,500)
Ramirez
Owner’sequityatendofyear($270,000–$136,000).................................. $134,000
Adddecreaseduetonetloss($115,000–$128,000).................................. 13,000
Addwithdrawals.......................................................................................... 39,000
Beginningowner’sequityplusadditionalinvestment............................ $186,000
Deductadditionalinvestment................................................................. 55,000
Owner’sequityatbeginningofyear.......................................................... $131,000
Addliabilitiesatbeginningofyear............................................................ 120,000
Assetsatbeginningofyear.................................................................(d) $251,000
1-15
Ex.1-21
EBONYINTERIORS
BalanceSheetFebr
uary29,2019
Assets
Cash $320,000
Supplies 30,000
Liabilities
Owner’sEquity
JustinBerk,capital 840,000
EBONYINTERIORS
BalanceSheetM
arch31,2019
Assets
Cash $380,000
Supplies 35,000
Liabilities
Owner’sEquity
JustinBerk,capital 975,000
b. Owner’sequity,March31............................................................................... $975,000
Owner’sequity,February29.......................................................................... 840,000
Netincome.................................................................................................... $135,000
c. Owner’sequity,March31............................................................................... $975,000
Owner’sequity,February29.......................................................................... 840,000
Increaseinowner’sequity........................................................................ $135,000
Add withdrawal.................................................................................................. 50,000
Net income................................................................................................... $185,000
1-16
Ex.1-22
a. Balancesheet:1,2,3,4,6,7,8,9,10,11,13
Incomestatement:5,12,14,15
b.
Yes.Anitemcanappearonmorethanonefinancialstatement.Forexample,cashappearson
boththebalancesheetandstatementofcashflows.However,thesameitemcannotappearo
nboththeincomestatementandbalancesheet.
c.
Yes.Theaccountingequationisrelevanttoallcompanies,includingExxonMobilCorpo
ration.
Ex.1-23
1. (a)operatingactivity
2. (a)operatingactivity
3. (b)investingactivity
4. (c)financingactivity
Ex.1-24
ETHOSCONSULTINGGROUP
FortheYearEndedMay31,2019
Cashreceiptsfromcustomers $637,500
Cashpaymentsforoperatingexpenses (475,000)
Cashpaymentsforpurchaseofland (90,000)
Cashreceiptsfromownerasinvestment $62,500
Netincreaseincashduringyear $117,500
CashasofJune1,2018 58,000
CashasofMay31,2019 $175,500
1-17
Ex.1-25
1.
Allfinancialstatementsshouldcontainthenameofthebusinessintheirheading.Thesta
tementofowner’sequityisincorrectlyheadedas“OmarFarah”ratherthanWe-
SellRealty.Theheadingofthebalancesheetneedsthenameofthebusiness.
2.
Theincomestatementandstatementofowner’sequitycoveraperiodoftimeandshouldbel
abeled“FortheMonthEndedAugust31,2019.”
3.
Theyearintheheadingforthestatementofowner’sequityshouldbe2019ratherthan201
8.
4.
Thebalancesheetshouldbelabeled“August31,2019,”ratherthan“FortheMonthEnded
August31,2019.”
5.
Intheincomestatement,themiscellaneousexpenseamountshouldbelistedasthelastexp
ense.
6.
Intheincomestatement,thetotalexpensesareincorrectlysubtractedfromthesalesco
mmissions,resultinginanincorrectnetincomeamount.Thecorrectnetincomeshould
be$24,150.Thisalsoaffectsthestatementofowner’sequityandtheamountofOmarFara
h,Capital,thatappearson
thebalancesheet.
7.
Inthestatementofowner’sequity,theadditionalinvestmentshouldbeaddedfirsttoOmarFar
ah,capital,asofAugust1,2019.Thenetincomeshouldbepresentednext,followedbytheamo
untofwithdrawals,whichissubtractedfromthenetincometoyieldtheincreaseinowner’seq
uity.Theincreaseinowner’sequityisaddedtoOmarFarah,capitalonAugust1,2019,todeter
mineOmarFarah,capitalonAugust31,2019.
8. Accountspayableshouldbelistedasaliabilityonthebalancesheet.
9. Accountsreceivableandsuppliesshouldbelistedasassetsonthebalancesheet.
10. Thebalancesheetassetsshouldequalthesumoftheliabilitiesandowner’sequity.
1-18
Ex.1-25(Concluded)
Correctedfinancialstatementsappearasfollows:
WE-SELLREALTY
IncomeStatement
Salescommissions $140,000
Expenses:
Officesalariesexpense $87,000
Rentexpense 18,000
Automobileexpense 7,500
Netincome $24,150
WE-SELLREALTY
OmarFarah,capital,August1,2019 $ 0
InvestmentonAugust1,2019 $15,000
NetincomeforAugust 24,150
WithdrawalsduringAugust (10,000)
OmarFarah,capital,August31,2019 $29,150
WE-SELLREALTY
BalanceSheetAu
gust31,2019
Assets
Cash $8,900
Supplies 4,000
Totalassets $51,500
Liabilities
Owner’sEquity
OmarFarah,capital 29,150
1-19
Ex.1-26
a. Year2:$30,624($39,946–$9,322)
Year1:$27,996($40,518–$12,522)
b. Year2:3.29($30,624÷$9,322)
Year1:2.24($27,996÷$12,522)
c.
Theratioofliabilitiestostockholders’equityincreasedfrom2.24to3.29indicatingani
ncreaseinriskforcreditorsfromYear1toYear2.
Ex.1-27
a. Year2:$9,968($31,827–$21,859)
Year1:$11,853($32,732–$20,879)
b. Year2:2.19($21,859÷$9,968)
Year1:1.76($20,879÷$11,853)
c. Theriskforcreditorshasincreasedfrom1.76inYear1to2.19inYear2.
d. TheHomeDepot’sratioofliabilitiestostockholders’equity(3.29inYear2and
2.24inYear1)ismoreinbothyearsthanisLowe’sratioofliabilitiestostockholders’equity(2.19in
Year2and1.76inYear1).Thus,therisktocreditorsofTheHomeDepotisslightlymorethanthatofL
owe’s.
NotetoInstructors:Bothcompanieshaveincreasedtheirlong-
termdebttotakeadvantageoflowinterestratesandanimprovingU.S.economy.
1-20
CHAPTER 1Introduction to Accounting and Business
PROBLEMS
Prob.1-1A
1. Liabilitie
Assets = s + Owner's Equity
Chad Chad
Accts. Supplie Accts. Wilson, Wilson, Fees Rent Salaries Supplies Auto Misc.
Cash + Rec. + s = Payable + Capital – Drawing + Earned – Expense – Expense – Expense – Exp. – Exp.
(a) + 30,000 + 30,000
(b) _______ + 1,800 + 1,800 _______
Bal 30,000 1,800 1,800 30,000
.
(c) + 10,000 _______ _______ _______ + 10,000
Bal 40,000 1,800 1,800 30,000 10,000
.
(d) – 4,500 _______ _______ _______ _______ – 4,500
Bal 35,500 1,800 1,800 30,000 10,000 – 4,500
.
(e) – 1,250 _______ – 1,250 _______ _______ _______
Bal 34,250 1,800 550 30,000 10,000 – 4,500
.
(f) _______ + 16,800 _______ _______ _______ + 16,800 _______
Bal 34,250 16,800 1,800 550 30,000 26,800 – 4,500
.
(g) – 1,730 _______ _______ _______ _______ _______ _______ – 750 – 980
Bal 32,520 16,800 1,800 550 30,000 26,800 – 4,500 – 750 – 980
.
(h) – 4,000 ________ _______ _______ _______ _______ _______ – 4,000 ______ _______
_
Bal 28,520 16,800 1,800 550 30,000 26,800 – 4,500 – 4,000 – 750 – 980
.
(i) _______ _______ – 1,120 _______ _______ _______ _______ _______ – 1,120 ______ _______
_
Bal 28,520 16,800 680 550 30,000 26,800 – 4,500 – 4,000 – 1,120 – 750 – 980
.
(j) – 7,500 _______ _______ _______ _______ – 7,500 _______ _______ _______ _______ ______ _______
_
Bal 21,020 16,800 680 550 30,000 – 7,500 26,800 – 4,500 – 4,000 – 1,120 – 750 – 980
.
2.
Owner’sequityistherightofownerstotheassetsofthebusiness.Theserightsareincreasedbyowner’sinvestment
1-21
sandrevenuesanddecreasedbyowner’swithdrawalsandexpenses.
3. $15,450($26,800–$4,500–$4,000–$1,120–$750–$980)
4. June’stransactionsincreasedChadWilson’scapitalto$37,950($30,000+$15,450–
$7,500),whichistheinitialcapitalinvestmentof$30,000plusJune'snetincomeof$15,450lessChadWilson’swithdrawalsof$7,
500.
1-22
Prob.1-2A
1. NORDICTRAVELAGENCY
IncomeStatement
FortheYearEndedDecember31,2019
Feesearned $912,500
Expenses:
Rentexpense 36,000
Utilitiesexpense 28,500
Netincome $327,500
FortheYearEndedDecember31,2019
IanEisele,capital,January1,2019 $670,000
Netincomefortheyear $327,500
IanEisele,capital,December31,2019 $955,500
BalanceSheetDece
mber31,2019
Assets
Cash $ 190,500
Supplies 5,500
Land 544,000
Liabilities
Accountspayable $ 69,500
Owner’sEquity
IanEisele,capital 955,500
4. IanEisele,Capitalof$955,500
1-23
Prob.1-3A
1.
RELIANCEFINANCIALSERVICES
IncomeStatement
FortheMonthEndedJuly31,2019
Feesearned
$144,500
Expenses:
Salariesexpense
$55,000
Rentexpense
33,000
Autoexpense
16,000
Suppliesexpense
4,500
Miscellaneousexpense
4,800
Totalexpenses
113,300
Netincome
$31,200
2.
1-24
SethFeye,capital,July1,2019
$ 0
InvestmentonJuly1,2019
$50,000
NetincomeforJuly
31,200
Withdrawals
(15,000)
Increaseinowner’sequity
66,200
SethFeye,capital,July31,2019
$66,200
3. RELIANCEFINANCIALSERVICES
BalanceSheet
July31,2019
Assets
Cash $32,600
Supplies 2,500
Totalassets $69,600
Liabilities
Owner’sEquity
SethFeye,capital 66,200
1-25
Prob.1-3A(Concluded)
4. (Optional)
Cashpaymentsforexpensesandpaymentsto
creditors* (112,400)
Cashflowsfrominvestingactivities 0
Cashreceiptofowner’sinvestment $50,000
Cashwithdrawalbyowner (15,000)
NetincreaseincashandJuly31,2019,cashbalance $32,600
*$3,600+$33,000+$20,800+
$55,000;theseamountsaretakenfromthecashcolumnshownintheproblem.
1-26
Prob. 1-4A
1. Liabilitie
Assets = s + Owner's Equity
Supplie
Accts. Pat Glenn, Pat Glenn, Sales Salaries Rent Auto s Misc.
Cash + Supplies = Payable + Capital – Drawing + Comm. – Exp. – Exp. – Exp. – Exp. – Exp.
(a) + 25,000 + 25,000
(b) _________ + 1,850 + 1,850 _________
Bal. 25,000 1,850 1,850 25,00
0
(c) – 1,200 ________ – 1,200 _________
_
Bal. 23,800 1,850 650 25,00
0
(d) + 41,500 ________ ________ _________ + 41,500
_
Bal. 65,300 1,850 650 25,00 41,50
0 0
(e) – 3,600 ________ ________ _________ _________ – 3,600
_
Bal. 61,700 1,850 650 25,00 41,50 – 3,600
0 0
(f) – 4,000 ________ ________ _________ – 4,000 _________ _______
_ _
Bal. 57,700 1,850 650 25,00 – 4,000 41,50 – 3,600
0 0
(g) – 4,650 ________ ________ _________ _________ _________ _______ – 3,050 – 1,600
_ _
Bal. 53,050 1,850 650 25,00 – 4,000 41,50 – 3,600 – 3,050 – 1,600
0 0
(h) – 5,000 ________ ________ _________ _________ _________ – 5,000 _______ _______ __________
_ _ _
Bal. 48,050 1,850 650 25,00 – 4,000 41,50 – 5,000 – 3,600 – 3,050 – 1,600
0 0
(i) _________ – 900 ________ _________ _________ _________ _______ _______ _______ – 900 __________
_ _ _
Bal. 48,050 950 650 – 4,000 – 5,000 – 3,600 – 3,050 – 900 – 1,600
25,000 41,500
1-27
Prob.1-4A(Concluded)2.
2. HALFMOONREALTY
IncomeStatement
Expenses:
Salariesexpense $5,000
Rentexpense 3,600
Suppliesexpense 900
Netincome $27,350
HALFMOONREALTY
PatGlenn,capital,July1,2019 $ 0
InvestmentonJuly1,2019 $25,000
NetincomeforJuly 27,350
Withdrawals (4,000)
PatGlenn,capital,July31,2019 $48,350
HALFMOONREALTY
BalanceSheetJ
uly31,2019
Assets
Cash $48,050
Supplies 950
Totalassets $49,000
Liabilities
Accountspayable $ 650
Owner’sEquity
PatGlenn,capital 48,350
1-28
Prob.1-5A
1. Assets = Liabilities + Owner’s Equity
Accounts Accounts
Cash + Receivable + Supplies + Land = Payable + Joel Palk, Capital
$45,000 + $93,000 + $7,000 + $75,000 = $40,000 + Joel Palk, Capital
$220,000 = $40,000 + Joel Palk, Capital
$180,000 = Joel Palk, Capital
1-29
Prob. 1-5A (Continued)
1-30
Accts. Accts. Joel Palk, Joel Palk,

Cash + Rec. + Supplies + Land = Payable + Capital – Drawing
Bal 45,00 93,00 7,00 75,00 40,00 180,00
.
(a) + 0
35,00 0 0 0 0 + 035,00
Bal 0
80,00 93,00 7,00 75,00 40,00 0
215,00
(b) – 50,00 + 50,00
Bal 0
30,00 93,00 7,00 0
125,00 40,00 215,00
(c) + 32,12
Bal 5
62,12 93,00 7,00 125,00 40,00 215,00
(d) – 6,00
Bal 0
56,12 93,00 7,00 125,00 40,00 215,00
(e) + 2,50 + 2,50
Bal 56,12 93,00 0
9,50 125,00 0
42,50 215,00
(f) – 22,80 – 22,80
Bal 0
33,32 93,00 9,50 125,00 0
19,70 215,00
(g) + 84,75
Bal 33,32 0
177,75 9,50 125,00 19,70 215,00
(h) + 29,50
Bal 33,32 177,75 9,50 125,00 0
49,20 215,00
(i) – 14,00
Bal 0
19,32 177,75 9,50 125,00 49,20 215,00
(j) + 88,00 – 88,00
Bal 0
107,32 0
89,75 9,50 125,00 49,20 215,00
(k) – 3,60
Bal 107,32 89,75 0
5,90 125,00 49,20 215,00
.
(l) – 512,00 0 0 0 0 0 –12,000
Bal 95,325 89,750 5,900 125,00 49,20 215,00 –12,000
. 0 0 0
1-31
Prob.1-5A(Continued)
Owner’s Equity (Continued)
Dry Dry
Cleaning Cleaning Wages Rent Supplies Truck Utilities Misc.
+ Revenue – Exp. – Exp. – Exp. – Exp. – Exp. – Exp. – Exp.
Bal.
(a)
Bal.
(b)
Bal.
(c) + 32,125
Bal. 32,125
(d) – 6,000
Bal. 32,125 – 6,000
(e)
Bal. 32,125 – 6,000
(f)
Bal. 32,125 – 6,000
(g) + 84,750
Bal. 116,875 – 6,000
(h) – 29,500
Bal. 116,875 – 29,500 – 6,000
(i) – 7,500 – 2,500 – 1,300 – 2,700
Bal. 116,875 – 29,500 – 7,500 – 6,000 – 2,500 – 1,300 – 2,700
(j)
Bal. 116,875 – 29,500 – 7,500 – 6,000 – 2,500 – 1,300 – 2,700
(k) – 3,600
Bal. 116,875 – 29,500 – 7,500 – 6,000 – 3,600 – 2,500 – 1,300 – 2,700
(l)
Bal. 116,875 – 29,500 – 7,500 – 6,000 – 3,600 – 2,500 – 1,300 – 2,700
1-32
Prob.1-5A(Continued)
3. D'LITEDRYCLEANERS
IncomeStatement
Drycleaningrevenue $116,875
Expenses:
Drycleaningexpense $29,500
Wagesexpense 7,500
Rentexpense 6,000
Truckexpense 2,500
Netincome $63,775
D'LITEDRYCLEANERS
StatementofOwner’sEquityForth
eMonthEndedJuly31,2019
JoelPalk,capital,July1,2019 $180,000
AdditionalinvestmentduringJuly $35,000
NetincomeforJuly 63,775
JoelPalk,capital,July31,2019 $266,775
D'LITEDRYCLEANERS
BalanceSheet
July31,2019
Assets
Cash $95,325
Supplies 5,900
Land 125,000
Liabilities
Owner’sEquity
JoelPalk,capital 266,775
1-33
Prob.1-5A(Concluded)
4. (Optional)
D'LITEDRYCLEANERS
Cashreceiptsfromcustomers* $120,125
creditors** (42,800)
NetincreaseincashduringJuly $50,325
Cashbalance,July1,2019 45,000
Cashbalance,July31,2019 $95,325
*$32,125+$88,000;theseamountsaretakenfromthecashcolumnofthespreadsheetinPart2.
**$6,000+$22,800+
$14,000;theseamountsaretakenfromthecashcolumnofthespreadsheetinPart2.
1-34
Prob.1-6A
a. Feesearned,$750,000($275,000+$475,000)
b. Suppliesexpense,$30,000($475,000–$300,000–$100,000–$20,000–$25,000)
c. DakotaRowe,capital,April1,2019,$0;WolverineRealtywasorganizedonApril1,2019.
d. NetincomeforApril,$275,000fromincomestatement
e. Increaseinowner’sequity,$525,000($375,000+$275,000–$125,000)
f. DakotaRowe,capital,April30,2019,$525,000
g. Totalassets,$625,000($462,500+$12,500+$150,000)
h. DakotaRowe,capital,$525,000($625,000–$100,000);sameas(g)
i. Totalliabilitiesandowner’sequity,$625,000($100,000+$525,000)
j. Cashreceivedfromcustomers,
$750,000;thisisthesameasfeesearned(a)sincetherearenoaccountsreceiv
able.
k. Netcashflowfromoperatingactivities,$362,500($750,000–$387,500)
l. Cashpaymentsforacquisitionofland,($150,000)
m. Cashreceivedasowner’sinvestment,$375,000
n. Cashwithdrawalbyowner,($125,000)
o. Netcashflowfromfinancingactivities,$250,000($375,000–$125,000)
p. NetincreaseincashandApril30,2019,cashbalance,$462,500($362,500–$150,000+
$250,000);also,thecashbalanceonthebalancesheet
1-35
Prob.1-1B
Liabilitie
1. Assets = s + Owner's Equity
Amy Amy Rent Salaries Supplie
Accts. Supplie Accts. Austin, Austin, Fees Expens Expens s Auto Misc.
Cash + Rec. + s = Payable + Capital Drawing + Earned – e – e – Expense – Exp. – Exp.
(a) + 50,000 + 50,000
(b) + 4,00 + 4,000
0
Bal 50,000 4,00 4,000 50,000
. 0
(c) – 2,300 – 2,300
Bal 47,700 4,00 1,700 50,000
. 0
(d) + 13,800 + 13,800
Bal 61,500 4,00 1,700 50,000 13,800
. 0
(e) – 5,000 – 5,000
Bal 56,500 4,00 1,700 50,000 13,800 – 5,000
. 0
(f) – 1,450 – 1,15 – 300
0
Bal 55,050 4,00 1,700 50,000 13,800 – 5,000 – 1,15 – 300
. 0 0
(g) – 2,500 – 2,500
Bal 52,550 4,00 1,700 50,000 13,800 – 5,000 – 2,500 – 1,15 – 300
. 0 0
(h) – 1,30 – 1,30
0 0
Bal 52,550 2,70 1,700 50,000 13,800 – 5,000 – 2,500 – 1,30 – 1,15 – 300
. 0 0 0
(i) + 12,500 + 12,500
Bal 52,550 12,500 2,70 1,700 50,000 26,300 – 5,000 – 2,500 – 1,30 – 1,15 – 300
. 0 0 0
(j) – 3,900 – 3,900
Bal 2,700 – 3,900 – 5,000 – 2,500 – 1,300 – 1,150 – 300
. 48,650 12,500 1,700 50,000 26,300
1-36
2.
Owner’sequityistherightofownerstotheassetsofthebusiness.Theserightsareincreasedbyowner’sinvestmentsandreven
uesanddecreasedbyowner’swithdrawalsandexpenses.
3. $16,050($26,300–$5,000–$2,500–$1,300–$1,150–$300)
4. March’stransactionsincreasedAmyAustin’scapitalto$62,150($50,000+$16,050–
$3,900),whichistheinitialinvestmentof$50,000plustheexcessofMarch’snetincomeof$16,050overAmyAustin’swithd
rawalsof$3,900.
1-37
Prob.1-2B
1. WILDERNESSTRAVELSERVICE
IncomeStatement
Feesearned $875,000
Expenses:
Rentexpense 75,000
Taxesexpense 10,000
Netincome $200,000
HarperBorg,capital,May1,2018 $180,000
Netincomefortheyear $200,000
HarperBorg,capital,April30,2019 $340,000
BalanceSheet
April30,2019
Assets
Cash $146,000
Supplies 9,000
Liabilities
Owner’sEquity
HarperBorg,capital 340,000
4. Netincomeof$200,000
1-38
Prob.1-3B
1. BRONCOCONSULTING
IncomeStatement
Feesearned $125,000
Expenses:
Salariesexpense $58,000
Rentexpense 27,000
Autoexpense 15,500
Netincome $10,900
2. BRONCOCONSULTING
JoseLoder,capital,August1,2019 $ 0
InvestmentonAugust1,2019 $75,000
NetincomeforAugust 10,900
JoseLoder,capital,August31,2019 $70,900
3. BRONCOCONSULTING
BalanceSheet
August31,2019
Assets
Cash $38,000
Supplies 2,900
Totalassets $73,900
Liabilities
Owner’sEquity
JoseLoder,capital 70,900
1-39
Prob.1-3B(Concluded)
4. (Optional)
BRONCOCONSULTING
creditors* (114,000)
Cashflowsfrominvestingactivities 0
NetincreaseincashandAugust31,2019,cashbalance $38,000
*$27,000+$6,000+$23,000+
$58,000;theseamountsaretakenfromthecashcolumnshownintheproblem.
1-40
Prob.1-4B
1. Assets = Liabilities + Owner's Equity
Maria Maria
Supplie Accts. Adams, Adams, Sales Rent Salaries Auto Supplies Misc.
Cash + s = Payable + Capital – Drawing + Comm. – Exp. Exp. – Exp. – Exp. – Exp.
(a) + 24,000 + 24,000
(b) – 3,600 – 3,60
0
Bal. 20,400 24,000 – 3,60
0
(c) – 1,950 – 1,35 – 600
0
Bal. 18,450 24,000 – 3,60 – 1,35 – 600
0 0
(d) + 1,200 + 1,20
0
Bal. 18,450 1,200 1,20 24,000 – 3,60 – 1,35 – 600
0 0 0
(e) + 19,800 + 19,80
0
Bal. 38,250 1,200 1,20 24,000 19,80 – 3,60 – 1,35 – 600
0 0 0 0
(f) – 750 – 750
Bal. 37,500 1,200 450 24,000 19,80 – 3,60 – 1,35 – 600
0 0 0
(g) – 2,500 1,200 450 24,000 19,80 – 3,60 – 2,50 – 1,35 – 600
0 0 0 0
Bal. 35,000 2,50
0
(h) – 3,500 – 3,50
0
Bal. 31,500 1,200 450 24,000 – 3,50 19,80 – 3,60 – 2,50 – 1,35 – 600
0 0 0 0 0
(i) – 900 – 900
Bal. 300 450 – 3,500 19,800 – 3,600 – 2,500 – 1,350 – 900 – 600
31,500 24,000
1-41
2. CUSTOMREALTY
IncomeStatement
FortheMonthEndedApril30,2019
Expenses:
Rentexpense $3,600
Salariesexpense 2,500
Suppliesexpense 900
Miscellaneousexpense 600
Totalexpenses 8,950
Netincome $10,850
CUSTOMREALTY
StatementofOwner’sEquityForth
eMonthEndedApril30,2019
MariaAdams,capital,April1,2019 $ 0
InvestmentonApril1,2019 $24,000
NetincomeforApril 10,850
Withdrawals (3,500)
MariaAdams,capital,April30,2019 $31,350
CUSTOMREALTY
BalanceSheet
April30,2019
Assets
Cash $31,500
Supplies 300
Totalassets $31,800
Liabilities
Owner’sEquity
MariaAdams,capital 31,350
1-42
Prob.1-5B
Accounts Accounts
Cash + Receivable + Supplies + Land = Payable + Beverly Zahn, Capital
$39,000 + $80,000 + $11,000 + $50,000 = $31,500 + Beverly Zahn, Capital
$180,000 = $31,500 + Beverly Zahn, Capital
$148,500 = Beverly Zahn, Capital
1-43
Prob.1-5B(Continued)
Liabilitie
2. Assets = + Owner’s Equity
s
Beverly Beverly
Accts. Accts. Zahn, Zahn,
Cash + Rec. + Supplies + Land Payable + Capital – Drawing
Bal. 39,00 80,00 11,000 50,00 31,500 148,500
0 0 0
(a) + 21,00 + 21,000
0
Bal. 60,00 80,00 11,000 50,00 31,500 169,500
0 0 0
(b) – 35,00 + 35,00
0 0
Bal. 25,00 80,00 11,000 85,00 31,500 169,500
0 0 0
(c) – 4,000
Bal. 21,00 80,00 11,000 85,00 31,500 169,500
0 0 0
(d) + 72,00
0
Bal. 21,00 152,00 11,000 85,00 31,500 169,500
0 0 0
(e) – 20,00 – 20,000
0
Bal. 1,000 152,00 11,000 85,00 11,500 169,500
0 0
(f) + 8,000 + 8,000
Bal. 1,000 152,00 19,000 85,00 19,500 169,500
0 0
(g) + 38,00
0
Bal. 39,00 152,00 19,000 85,00 19,500 169,500
0 0 0
(h) + 77,00 – 77,00
0 0
Bal. 116,00 75,00 19,000 85,00 19,500 169,500
0 0 0
(i) + 29,450
Bal. 116,00 75,00 19,000 85,00 48,950 169,500
0 0 0
(j) – 29,20
0
Bal. 86,80 75,00 19,000 85,00 48,950 169,500
0 0 0
(k) – 7,200
Bal. 86,80 75,00 11,800 85,00 48,950 169,500
0 0 0
(l) – 5,000 – 5,000
1-44
Bal. 81,800 75,000 85,000 48,950 – 5,000

11,800 169,500
1-45
Dry Dry Supplie
Cleaning Cleaning Wages s Rent Truck Utilities Misc.
+ Revenue – Exp. – Exp. – Exp. – Exp. – Exp. – Exp. – Exp.
Bal.
(a)
Bal.
(b)
Bal.
(c) – 4,000
Bal. – 4,000
(d) + 72,000
Bal. 72,000 – 4,000
(e)
Bal. 72,000 – 4,000
(f)
Bal. 72,000 – 4,000
(g) + 38,000
Bal. 110,000 – 4,000
(h)
Bal. 110,000 – 4,000
(i) – 29,450
Bal. 110,000 – 29,450 – 4,000
(j) – 24,000 – 2,100 – 1,800 – 1,300
Bal. 110,000 – 29,450 – 24,000 – 4,000 – 2,100 – 1,800 – 1,300
(k) – 7,200
Bal. 110,000 – 29,450 – 24,000 – 7,200 – 4,000 – 2,100 – 1,800 – 1,300
(l)
Bal. 110,000 – 29,450 – 24,000 – 7,200 – 4,000 – 2,100 – 1,800 – 1,300
1-46
3. BEV'SDRYCLEANERS
IncomeStatement
FortheMonthEndedNovember30,2019
Drycleaningrevenue $110,000
Expenses:
Drycleaningexpense $29,450
Wagesexpense 24,000
Rentexpense 4,000
Truckexpense 2,100
Netincome $40,150
BEV'SDRYCLEANERS
FortheMonthEndedNovember30,2019
BeverlyZahn,capital,November1,2019 $148,500
AdditionalinvestmentduringNovember $21,000
NetincomeforNovember 40,150
Withdrawals (5,000)
BeverlyZahn,capital,November30,2019 $204,650
BEV'SDRYCLEANERS
BalanceSheet
November30,2019
Assets
Cash $81,800
Supplies 11,800
Land 85,000
Liabilities
Owner’sEquity
BeverlyZahn,capital 204,650
1-47
4. (Optional)
BEV'SDRYCLEANERS
FortheMonthEndedNovemer30,2019
Cashreceiptsfromcustomers* $115,000
creditors** (53,200)
NetincreaseincashduringNovember $42,800
Cashbalance,November1,2019 39,000
Cashbalance,November30,2019 $81,800
*$38,000+
**$4,000+$20,000+
1-48
Prob.1-6B
a. Wagesexpense,$203,200($288,000–$48,000–$17,600–$14,400–$4,800)
b. Netincome,$112,000($400,000–$288,000)
c. LuAnnMartin,capital,May1,2019,$0;AtlasRealtywasorganizedonMay1,2019.
d. InvestmentonMay1,2019,$160,000;fromstatementofcashflows
e. NetincomeforMay,$112,000;from(b)
f. Withdrawals,$64,000;fromstatementofcashflows
g. Increaseinowner’sequity,$208,000($160,000+$112,000–$64,000)
h. LuAnnMartin,capital,May31,2019,$208,000
i. Land,$120,000;fromstatementofcashflows
j. Totalassets,$256,000($123,200+$12,800+$120,000)
k. LuAnnMartin,capital,$208,000
l. Totalliabilitiesandowner’sequity,$256,000($48,000+$208,000)
m. Cashreceivedfromcustomers,
$400,000;thisisthesameasfeesearnedsincetherearenoaccountsreceivable.
n. Netcashflowfromoperatingactivities,$147,200($400,000–$252,800)
o. Netcashflowfromfinancingactivities,$96,000($160,000–$64,000)
p. NetincreaseincashandMay31,2019,cashbalance,$123,200($147,200–$120,000
+$96,000);also,thecashbalanceonthebalancesheet
1-49
CONTINUING PROBLEM
Liabilitie
1. Assets = + Owner’s Equity
s
Peyton Peyton
Accts. Accts. Smith, Smith, Fees
Cash + Rec. + Supplies = Payable + Capital – Drawing + Earned
June 1+ 4,000 + 4,000
June 2+ 3,500 + 3,500
Bal. 7,500 4,000 3,500
June 2– 800
Bal. 6,700 4,000 3,500
June 4 + 350 + 350
Bal. 6,700 350 350 4,000 3,500
June 6– 500
Bal. 6,200 350 350 4,000 3,500
June 8– 675
Bal. 5,525 350 350 4,000 3,500
June 12 – 350
Bal. 5,175 350 350 4,000 3,500
June 13 – 100 – 100
Bal. 5,075 350 250 4,000 3,500
June 16 + 300 + 300
Bal. 5,375 350 250 4,000 3,800
June 22 + 1,000 + 1,000
Bal. 5,375 1,000 350 250 4,000 4,800
June 25 + 500 + 500
Bal. 5,875 1,000 350 250 4,000 5,300
June 29 – 240
Bal. 5,635 1,000 350 250 4,000 5,300
June 30 + 900 + 900
Bal. 6,535 1,000 350 250 4,000 6,200
June 30 – 400
Bal. 6,135 1,000 350 250 4,000 6,200
June 30 – 300
Bal. 5,835 1,000 350 250 4,000 6,200
June 30 – 180
Bal. 5,835 1,000 170 250 4,000 6,200
June 30 – 415
Bal. 5,420 1,000 170 250 4,000 6,200
June 30 – 1,000
Bal. 4,420 1,000 170 250 4,000 6,200
June 30 – 500 – 500
Bal. – 500
3,920 1,000 170 250 4,000 6,200
1-50
1-51
Continuing Problem (Continued)

Office Equip. Adver-

Music Rent Rent tising Wages Utilities Supplies Misc.
– Exp. – Exp. – Exp. – Exp. – Exp. – Exp. – Exp. – Exp.
June 1
June 2
Bal.
80
June 2 –
0
80
Bal. –
0
June 4
80
Bal. –
0
50
June 6 –
0
80 50
Bal. – –
0 0
67
June 8 –
5
80 67 50
Bal. – – –
0 5 0
June 12 – 350
80 67 50
Bal. – 350 – – –
0 5 0
June 13
80 67 50
Bal. – 350 – – –
0 5 0
June 16
80 67 50
Bal. – 350 – – –
0 5 0
June 22
80 67 50
Bal. – 350 – – –
0 5 0
June 25
80 67 50
Bal. – 350 – – –
0 5 0
June 29 – 240
80 67 50
Bal. – 590 – – –
0 5 0
June 30
80 67 50
Bal. – 590 – – –
0 5 0
40
June 30 –
0
80 67 50 40
Bal. – 590 – – – –
0 5 0 0
30
June 30 –
0
Bal. – 590 – 80 – 67 – 50 – 40 – 30
1-52
0 5 0 0 0
18
June 30 –
0
80 67 50 40 30 18
Bal. – 590 – – – – – –
0 5 0 0 0 0
June 30 – 415
80 67 50 40 30 18
Bal. – 590 – – – – – – – 415
0 5 0 0 0 0
1,00
June 30 –
0
1,59 80 67 50 40 30 18
Bal. – – – – – – – – 415
0 0 5 0 0 0 0
June 30
Bal. – 1,590 – 800 – 675 – 500 – 400 – 300 – 180 – 415
1-53
ContinuingProblem(Concluded)
2. PSMUSIC
IncomeStatement
FortheMonthEndedJune30,2019
Feesearned: $6,200
Expenses:
Musicexpense $1,590
Officerentexpense 800
Equipmentrentexpense 675
Advertisingexpense 500
Wagesexpense 400
Utilitiesexpense 300
Suppliesexpense 180
Totalexpenses 4,860
Netincome $1,340
3. PSMUSIC
FortheMonthEndedJune30,2019
PeytonSmith,capital,June1,2019 $ 0
InvestmentonJune1,2019 $4,000
NetincomeforJune 1,340
Withdrawals (500)
PeytonSmith,capital,June30,2019 $4,840
4. PSMUSIC
BalanceSheet
June30,2019
Assets
Cash $3,920
Supplies 170
Totalassets $5,090
Liabilities
Owner’sEquity
PeytonSmith,capital 4,840
1-54
CASES&PROJECTS
CP1-1
1.
ThecarrepairisapersonalexpenseandisMarco'spersonalresponsibility.Byusingpartnersh
ipfundstopayfortherepair,Marcoisbehavingunethicallybecauseheisviolatingthebusiness
entityassumption.Thebusinessentityassumptiontreatsthebusinessasaseparateentityfro
mitsowners.Bytakingmoneyfromthepartnershipforapersonalexpense,Marcoiseffectively
stealingfromhispartners.
2.
Thepartnership'snetincomewillbereducedbythe$2,000Marcohastaken.Thiswillreduc
etheamountofnetincomeavailabletoMarco'spartners.
3.
Marcocouldaskhispartnersforaloanfromthepartnership.Theloancouldberepaidoutofhis
salaryorfromhisshareofthepartnershipincome.
CP1-2
1.
AcceptableprofessionalconductrequiresthatColleenFernandezsupplyFirstFederalBan
kwithalltherelevantfinancialstatementsnecessaryforthebanktomakeaninformeddecisi
on.Therefore,Colleenshouldprovidethecompletesetoffinancialstatements.Thesecanbe
supplementedwithadiscussionofthenetlossinthepastyearorotherdataexplainingwhygr
antingtheloanis
agoodinvestmentforthebank.
2. a.
Ownersaregenerallywillingtoprovidebankerswithinformationabouttheoperatingan
dfinancialconditionofthebusiness,suchasthefollowing:
● OperatingInformation:
● Descriptionofbusinessoperations
● Resultsofpastoperations
● Preliminaryresultsofcurrentoperations
● Plansforfutureoperations
● FinancialCondition:
● Listofassetsandliabilities(balancesheet)
● Estimatedcurrentvaluesofassets
● Owner’spersonalinvestmentinthebusiness
● Owner’scommitmenttoinvestadditionalfundsinthebusiness
Ownersarenormallyreluctanttoprovidethefollowingtypesofinformationtobankers:
1-55
ProprietaryOperatingInformation.Suchinformation,whichmighthurtthebusines
sifitbecomesknownbycompetitors,mightincludespecialprocessesusedbythebu
sinessorfutureplanstoexpandoperationsintoareasthatarenotcurrentlyservedby
acompetitor.
1-56
CP1-2(Concluded)
●
PersonalFinancialInformation.Ownersmayhavelittlechoiceherebecausebankso
ftenrequireownersofsmallbusinessestopledgetheirpersonalassetsassecurityfo
rabusinessloan.Personalfinancialinformationrequestedbybankersofteninclude
stheowner’snetworth,salary,andotherincome.Inaddition,bankersusuallyreques
tinformationaboutfactorsthatmightaffectthepersonalfinancialconditionoftheow
ner.Forexample,apendingdivorcebytheownermightsignificantlyaffecttheowner’
spersonalwealth.
b.
Bankerstypicallywantasmuchinformationaspossibleabouttheabilityofthebusines
sandtheownertorepaytheloanwithinterest.Examplesofsuchinformationaredescrib
edabove.
c.
Bothbankersandbusinessownerssharethecommoninterestofthebusinessdoing
wellandbeingsuccessful.Ifthebusinessissuccessful,thebankerswillreceivetheirl
oanpaymentsontimewithinterestandtheownerswillincreasetheirpersonalwealth.
CP1-3
AsamplesolutionbasedonNikeInc.'sForm10-
KforthefiscalyearendedMay31,2015,isasfollows:
1. Nike,Inc.
2. Beaverton,Oregon
3. MarkG.Parker
4. Manufacturing
5.
Ourprincipalbusinessactivityisthedesign,development,andworldwidemarketingandselli
ngofathleticfootwear,apparel,equipment,accessories,andservices.
6.
Incomestatement,statementofcomprehensiveincome,balancesheet,statementofstockhol
ders'equity,statementofcashflows
1-57
CP1-4
ExampleMemo
To: MyTeacherFrom:
ImaStudentDate:
January1,20XX
Re: CausesofAccountingFraud
Businessandaccountingfraudtypicallyresultfromeitherafailureofindividualcharacteroraculture
ofgreedwithinanorganization.Managersandaccountantsoftenfacepressuretomeetorexceedaco
mpany'sfinancialgoals.Attimes,supervisorscanplacepressureonindividualstoviolateaccountin
gstandardstoimproveacompany'sreportedfinancialresults.Individualswhogiveintothesepress
uresexhibitafailureofindividualcharacter.Inothersituations,theorganizationmayexpectemploye
estoviolateaccountingrulesaspartoftheirjob.Thisoccursinorganizationsthatdonovalueethicald
ecisionmakingorfairfinancialreportingandexhibitacultureofethicalindifference.
CP1-5
Thedifferenceinthetwobankbalances,$55,000($80,000–
$25,000),maynotbepureprofitfromanaccountingperspective.Todeterminetheaccountingpro
fitforthesix-
monthperiod,therevenuesfortheperiodwouldneedtobematchedwiththerelatedexpenses.Th
erevenuesminustheexpenseswouldindicatewhetherthebusinessgeneratednetincome(profi
t)oranetlossfortheperiod.Usingonlythedifferencebetweenthetwobankaccountbalancesigno
ressuchfactorsasamountsduefromcustomers(receivables),liabilities(accountspayable)that
needtobepaidforwagesorotheroperatingexpenses,additionalinvestmentsthatDr.Cousinsm
ayhavemadeinthebusinessduringtheperiod,orwithdrawalsduringtheperiodthatDr.Cousins
mighthavetakenforpersonalreasonsunrelatedtothebusiness.
Somebusinessesthathavefew,ifany,receivablesorpayablesmayusea“cash”basisofaccountin
g.Thecashbasisofaccountingignoresreceivablesandpayablesbecausetheyareassumedtobein
significantinamount.However,evenwiththecashbasisofaccounting,additionalinvestmentsdur
ingtheperiodandanywithdrawalsduringtheperiodmustbeconsideredindeterminingthenetinco
me(profit)ornetlossfortheperiod.
1-58
CP 1-6
1. Assets = Liabilities + Owner's Equity
Lisa Lisa
Accts. Duncan, Duncan, Fees Salaries Rent Supplies Misc.
Cash + Supplies = Payable + Capital – Drawing + Earned – Expense – Expense – Expense – Exp.
(a) + 950 + 950
(b) – 300 + 300
Bal. 650 300 950
(c) – 275 – 275
Bal. 375 300 950 – 275
(d) – 100 + 150 – 250
Bal. 275 300 150 950 – 525
(e) + 1,750 + 1,750
Bal. 2,025 300 150 950 1,750 – 525
(f) + 600 + 600
Bal. 2,625 300 150 950 2,350 – 525
(g) – 800 – 800
Bal. 1,825 300 150 950 2,350 – 800 – 525
(h) – 290 – 290
Bal. 1,535 300 150 950 2,350 – 800 – 525 – 290
(i) + 1,300 + 1,300
Bal. 2,835 300 150 950 3,650 – 800 – 525 – 290
(j) – 120 – 120
Bal. 2,835 180 150 950 3,650 – 800 – 525 – 120 – 290
(k) – 400 – 400
Bal. 2,435 180 150 950 – 400 3,650 – 800 – 525 – 120 – 290
1-59
CP1-6(Continued)
2. SERVE-N-VOLLEY
IncomeStatement
FortheMonthEndedSeptember30,2019
Feesearned: $3,650
Expenses:
Salariesexpense $800
Rentexpense 525
Suppliesexpense 120
Totalexpenses 1,735
Netincome $1,915
3. SERVE-N-VOLLEY
FortheMonthEndedSeptember30,2019
LisaDuncan,capital,September1,2019 $ 0
InvestmentonSeptember1,2019 $ 950
NetincomeforSeptember 1,915
Withdrawals (400)
LisaDuncan,capital,September30,2019 $2,465
4 SERVE-N-VOLLEY
BalanceSheetSepte
mber30,2019
Assets
Cash $2,435
Supplies 180
Totalassets $2,615
Liabilities
Owner’sEquity
LisaDuncan,capital 2,465
1-60
CP1-6(Concluded)
5. a. Serve-N-
VolleywouldprovideLisawith$715moreincomepermonththanworkingasawaitress.This
amountiscomputedasfollows:
NetincomeofServe-N-Volley,permonth......................................................... $1,915
Earningsaswaitress,permonth:
30hoursperweek×$10perhour×4weeks................................................... 1,200
Difference............................................................................................................. $715
b. OtherfactorsthatLisashouldconsiderbeforediscussingalong-
termarrangementwiththePhoenixTennisClubincludethefollowing:
LIsashouldconsiderwhethertheresultsofoperationsforSeptemberareindicativeofw
hattoexpecteachmonth.Forexample,Lisashouldconsiderwhetherclubmemberswill
continuetorequestlessonsorusetheballmachineduringthefallmonthswheninteresti
ntennismayslacken.Lisashouldevaluatewhethertheadditionalincomeof$715permo
nthfromServe-N-Volleyisworththeriskbeingtakenandtheeffortbeingexpended.
LisashouldalsoconsiderhowmuchherinvestmentinServe-N-
Volleycouldhaveearnedifinvestedelsewhere.Forexample,iftheinitialinvestme
ntof$950hadbeeninvestedtoearnarateofreturnof6%peryear,itwouldhaveearn
ed$4.75inSeptember,or$57fortheyear.
NotetoInstructors:Numerousotherconsiderationscouldbementionedbystudents,such
astheabilityofLisatowithdrawcashfromServe-N-
Volleyforpersonaluse.Forexample,someofherinvestmentinServe-N-
Volleywillbeintheformofsupplies(tennisballs,forexample),whicharereadilyconvertiblet
ocash.Theobjectiveofthiscaseisnottomentionallpossibleconsiderationsbut,rather,toe
ncouragestudentstobeginthinkingabouttheuseofaccountinginformationinmakingbusi
nessdecisions.
1-61
CP1-7
NotetoInstructors:Thepurposeofthisactivityistofamiliarizestudentswiththecertificationre
quirementsandtheironlineavailability.Youmightusethisasanopportunitytodiscusstheadv
antagesanddisadvantagesofcareersinpublicaccounting(CPA),managementaccounting(C
MA),andinternalauditing(CIA).
Thefollowingwebsitesprovidestudentswithusefulinformation(suchasstartingsalaries)onc
areersinaccounting:
AmericanInstituteofCertifiedPublicAccountants(AICPA)www.aicpa.org/becomeacpa/f
aqs/pages/faqs.aspx
InstituteofCertifiedManagementAccountants(IMA)http://www.imanet.org/c
ma-certification/cma-certification-overview
InstituteofInternalAuditors(IIA)
https://na.theiia.org/about-us/Pages/About-The-Institute-of-Internal-Auditors.aspx
CP1-8
First Second Third
Year Year Year
Netcashflowsfromoperatingactivities negative positive
positiveNetcashflowsfrominvestingactivities negative negative
negativeNetcashflowsfromfinancingactivities positive positive positive
Start-
upcompaniesnormallyexperiencenegativenetcashflowsfromoperatingactivities;however,
Amazon.comwasabletogeneratepositivenetcashflowsfromoperationsbyitssecondyear.St
art-
upcompaniesnormallyhavenegativenetcashflowsfrominvestingactivitiesastheybuildupth
eirinfrastructurethroughpurchasesofproperty,plant,andequipment.ThiswasthecasewithA
mazon.comforeachofitsfirstthreeyears.Likewise,start-
upcompaniesnormallyhavepositivenetcashflowsfromfinancingactivitiesfromraisingcapit
al.ThisisalsothecaseforAmazon.com.Also,start-
upcompaniesnormallyhavepositivecashflowsfromfinancingactivities—
activitiesfromraisingcapital.
1-62

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a. 1. manufacturing 6. service 11. service

Prob. 1-5A (Continued)

2. Assets = Liabilities + Owner’s Equity

Accts. Accts. Joel Palk, Joel Palk,

Bal. 81,800 75,000 85,000 48,950 – 5,000

Continuing Problem (Continued)

Office Equip. Adver-

positiveNetcashflowsfrominvestingactivities negative negative

negativeNetcashflowsfromfinancingactivities positive positive positive

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