1. The accounts of Odie Company with the increases or decreases that occurred luring the past ye Account Inerense Decrease cash $25,000 Accounts receivable $5,000 Accounts payable $11,000 Notes payable $16,000 Except for net income, an investment of $3,000 by the owner, and 2 withdraw: 1 $11,000 by the owner, no other Items affected owner's equity. Using the balance sheet uation, compute net income for the past year. Change In assets » $25,000 - $5,000 = $20,000 Change In labilities « -$11,000 + $16,000 = $5,000 Change in equity = $20,000 - $5,000 = $15,000 Change in equity = $15,000 = NI + $3,000 - $11,000 Net income = $23,000, To maintain the balance shi t equation, Assets = Liabilities + Equity, net Income must be $23,000 2. You are reviewing the accounting records of Buddy's Foreign Automotive, owned by Bruce Jones. You have uncovered the following situations. List the appror te accounting principle related to each independent scenario and suggest a correct action for each, 1. In August, 2 check for $500 was written to Community Sports. This amount represents soccer camp for his daughter Cassie. 2, Bruce plans Going Out of Business Sale for June, since he will be closing the business for s month-long vacation in July. He plans to reopen August 1 and will continue operating Buddy's Foreign Automotive indefinitely. 3. Buddy ceived a shipment of tools from Ontario, Canada. The invoice was stat in Canadian dollars. 4. Sandy Lane \4 $1,500 for a major repair se ice. The amount was recorded as revenue. The parts for the repair must bbe ordered from overseas and the service won't be complete unt! the following month. It is mandatory for the company to comply with such policies and principles, the entity is also required to provide for any assumption which they have taken while preparing the financials 60 as to make them more understandable for thelr users According to this concept, businesses need to update the records of business-related transactions, and non-commerci transactions should be reported so that the amount received from individuals under the heading of drawing for personal use is deducted from the amount. Owners! equity. Therefore, the amount withdrawn for the daughter's spor expenses is either returned in business or shown as a negative sgn in capital 2. Going concern concept: Therefore, it Is not considered a breach of business continuity if the owner takes a vacation oF leaves for @ period of time. So even in this case the concept of continulty applies. 3. Monetary Unit Concept: For the Accounting Purposes the invoice should be restated in canadian dollars. Revenue Recognition Concept: Revenue Should not be recognized, because the table has not been delivered. The Amount $1,500 should be recorded in an account such as Deposits Received fo: Customers upto table is to be delivered eT Tae3. Soo Lin began an Internet Consulting practice and completed these transactions during April of the current year: Show ths cts of the above transactions on the accounting equation of Soo Lin, Consultant, Use the following format for your answers, The frst item is shown as an examole. Increase Decrease = 0 No effect = N pes reas ees Etiog April 1 1 April 2 N April 3 D D April 4 April 8 I April 15 1 April 20 N April 30 D D April 30 4. On October 1, Ebony Ernst organized Ernst Consulting; on October 3, th contributed $84,000 in assets t launch the business. On October 31, the company's records show the following tems and amounts, Use this Informa 1» to prepare an October income statement, statement of owner's equity and an October 31 balance sheet for Ernst Consulting Income Statement. For period ended October 31 lesan ed OUT Consulting Revenue $14,000 Operating Expenses | Rent Expense $3,550 Salaries Expense $7,000 Telephone Expense | $760 Miscellenous Expense $580 Net Income $2,110 Page2 To eee aStatement of owner equity Capital $84,000 Net Income $2,110 ‘Owner withdrawals $2,000 Oct 31 owner capital $84,110 Balance Sheet Page3 Assets Bs Cash $11,360 Accounts payable $8,500 Account Receivable $14,000 Office Supplies $3,250 Equity Land $46,000 Owner Capital $ 84,110 Office equipment $ 18,000 Net Income $2,110 Total Liabilities & $92,610 ‘owner capital Teacher: Li Xi