Chapter 1 Homework

 

1.   Jan Petri is the stockholder and operator of Galaxy LLC, a motivational consulting business. At the end of its accounting period, December 31, 2017, Galaxy has assets of $758,000 and liabilities of $182,000. Using the accounting equation, determine the following amounts:

a. Stockholders’ equityas of December 31, 2017. _____

b. Stockholders’ equity as of December 31, 2018, assuming that assets increased by $144,000 and liabilities decreased by $44,000 during 2018. _____

 

2.  The revenues and expenses of Paradise Travel Service for the year ended May 31, 2018, follow:

Accounts (revenue and expense items)
Fees earned	$1,455,000
Office expense	345,000
Miscellaneous expense	34,000
Wages expense	840,000

Prepare an income statement for the year ended May 31, 2018. Refer to the lists of Accounts in the information given, Labels, and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon (:) will automatically appear if it is required. If a net loss is incurred, enter that amount as a negative number using a minus sign.

 

3.  The revenues and expenses of Paradise Travel Service for the year ended May 31, 2018, follow:

Accounts
Fees earned	$1,495,000
Office expense	334,000
Miscellaneous expense	36,000
Wages expense	825,000

Everett McCauley invested an additional $45,000 in the business in exchange for common stock, and $32,000 of dividends were paid during the year. Retained earnings as of June 1, 2017, was $575,000.

Prepare a retained earnings statement for the year ended May 31, 2018. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. “Less” or “Add” is not required. A decrease to retained earnings should be entered as a negative amount.

 

4.  The balances of Paradise Travel Service’s accounting equation items for the year ended May 31, 2018, are listed below. $10,000 of dividends were paid during the year. Retained earnings as of June 1, 2017, were $300,000.

Accounts
Fees earned	$900,000
Office expense	300,000
Miscellaneous expense	15,000
Wages expense	450,000
Accounts payable	18,000
Accounts receivable	38,000
Cash	52,000
Common stock	100,000
Land	450,000
Supplies	3,000

Prepare a balance sheet as of May 31, 2018. Refer to the lists of Accounts, Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading.

 

5.  Accounting Equation

The total assets and total liabilities of ThriftShop, Inc. and Bullseye Corporation are shown below.

	ThriftShop, Inc				Bullseye
Assets	$19,640				$26,907
Liabilities	3,732				2,153

Determine the stockholders’ equity of each company.

ThriftShop’s stockholders’ equity  : _______

Bullseye’s stockholders’ equity  : ________

 

6.  Determine the missing amount for each of the following:

	Assets			=	Liabilities			+	Stockholders’ Equity
a.	$______			=	$239,840			+	$749,500
b.	$119,920			=	$________			+	$37,480
c.	$57,710			=	$8,240			+	$_________

 

7.  Asset, liability, and stockholders’ equity items

Indicate whether each of the following is identified with (1) an asset, (2) a liability, or (3) stockholders’ equity:

a. Accounts payable:

1. Asset
2. Liability
3. Stockholders’ equity

 

b. Cash

1. Asset
2. Liability
3. Stockholders’ equity

 

c. Fees earned

1. Asset
2. Liability
3. Stockholders’ equity

 

d. Land

1. Asset
2. Liability
3. Stockholders’ equity

 

e.  Supplies

1. Asset
2. Liability
3. Stockholders’ equity

 

f. Wages expense

1. Asset
2. Liability
3. Stockholders’ equity

 

 

8.  Effect of Transactions on Accounting Equation

What is the effect of each of the following transactions on the three elements (assets, liabilities, and stockholders’ equity) of the accounting equation?

a. Invested cash in business

1. Decreases assets and decreases stockholders’ equity.
2. Decreases assets and increases stockholders’ equity.
3. Increases assets and decreases stockholders’ equity.
4. Increases assets and increases liabilities.
5. Increases assets and increases stockholders’ equity.

 

b. Paid for utilities used in the business

1. Decreases assets and decreases stockholders’ equity.
2. Decreases assets and increases liabilities.
3. Increases assets and decreases assets.
4. Increases assets and decreases liabilities.
5. Increases assets and decreases stockholders’ equity.
6. Decreases assets and decreases stockholders’ equity.

 

c.  Purchased supplies for cash.

1. Decreases assets and decreases assets.
2. Decreases assets and decreases stockholders’ equity.
3. Increases assets and decreases assets.
4. Increases assets and decreases liabilities.
5. Increases assets and increases liabilities.
6. Increases assets and decreases assets.

 

d.   Purchased supplies on account.

1. Decreases assets and decreases stockholders’ equity.
2. Decreases assets and increases stockholders’ equity.
3. Increases assets and decreases assets.
4. Increases assets and increases liabilities.
5. Increases assets and increases stockholders’ equity.
6. Increases assets and increases liabilities.

 

e.  Received cash for services performed.

1. Decreases assets and decreases stockholders’ equity.
2. Decreases assets and increases stockholders’ equity.
3. Increases assets and decreases stockholders’ equity.
4. Increases assets and increases liabilities.
5. Increases assets and increases stockholders’ equity.
6. Increases assets and increases stockholders’ equity.

 

9. Effect of Transactions on Stockholders’ Equity

Indicate whether each of the following types of transactions will either (a) increase stockholders’ equity or (b) decrease stockholders’ equity:

Expenses      ________

Issuing common stock in exchange for cash    _________

Dividends   ________

Revenues   ________

 

10.   Imaging Services was organized on March 1, 2018. A summary of the revenue and expense transactions for March follows:

Fees earned	$404,400
Wages expense	206,200
Rent expense	40,000
Supplies expense	12,500
Miscellaneous expense	13,300

Prepare an income statement for the month ended March 31.

Imaging Services Income Statement For the Month Ended March 31, 2018

___________________		$ ________________
Expenses
_________________	$ _____________
_________________	$______________
_________________	$______________
_________________	$______________
Total Expenses		$ _________________
Net Income		$__________________

 

11.  Retained Earnings Statement

Financial information related to Healthy Products Company for the month ended November 30, 2018, is as follows:

Net income for November	$93,500
Cash dividends paid during November	7,000
Retained earnings, November 1, 2018	2,940,000

 

a. Prepare a retained earnings statement for the month ended November 30, 2018. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign.

Healthy Products Company Retained Earnings Statement For the Month Ended November 30, 2018
____________________		$ ___________
____________________	$ _________________
____________________	$__________________
_______________________________		______________
_______________________________		$_____________

b. Why is the retained earnings statement prepared before the November 30, 2018, balance sheet?

1. To arrive at the number of shares outstanding.
2. To calculate the net income for the year.
3. To calculate the ending retained earnings balance to be included on the balance sheet.
4. To calculate the total assets.

 

12.

Transactions

The selected transactions below were completed by Cota Delivery Service during July:

Indicate the effect of each transaction on the accounting equation by choosing the appropriate letter from the following list:

1. Increase in an asset, decrease in another asset.
2. Increase in an asset, increase in a liability.
3. Increase in an asset, increase in stockholders’ equity.
4. Decrease in an asset, decrease in a liability.
5. Decrease in an asset, decrease in stockholders’ equity.

 

a. Received cash in exchange for common stock, $35,000.

b. Purchased supplies for cash, $1,100.

c. Paid rent for July, $4,500.

d. Paid advertising expense, $900.

e.  Received cash for providing delivery services, $33,000.

f. Billed customers for delivery services on account, $58,000.

g.Paid creditors on account, $2,900.

h. Received cash from customers on account, $27,500.

i. Determined that the cost of supplies on hand was $300 and $8,600 of supplies had been used during the month.

j. Paid cash dividends, $2,500.

 

13. Balance Sheet Items

From the following list of selected items taken from the records of Bobcat Appliance Service as of a specific date, identify those that would appear on the balance sheet:

 

1. Accounts Receivable

2. Cash

3. Common Stock

4. Fees Earned

5. Land

6. Supplies

7. Supplies Expens

8. Utilities Expense

9. Wages Expense

10. Wages Payable

 

14.  The amounts of the assets and liabilities of Journey Travel Agency at December 31, 2018, the end of the year, and its revenue and expenses for the year follow. The retained earnings were $1,341,000 on January 1, 2018, the beginning of the year. During the year, dividends of $75,000 were paid.

Accounts payable	$ 69,500
Accounts receivable	236,500
Cash	190,500
Common stock	450,000
Fees earned	383,500
Land	1,500,000
Miscellaneous expense	14,500
Rent expense	22,500
Supplies	7,000
Supplies expense	11,300
Utilities expense	16,700
Wages expense	170,000
	Required:
1.	Prepare an income statement for the year ended December 31, 2018. Refer to the Accounts given in the Instructions and to the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss is incurred, enter that amount as a negative number using a minus sign. A colon (:) will automatically appear if it is required.
2.	Prepare a retained earnings statement for the year ended December 31, 2018. Refer to the Accounts given in the Instructions and to the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. If a net loss is incurred or dividends were paid, enter that amount as a negative number using a minus sign. The word “Less” or “Add” is not needed in the Retained Earnings Statement.
3.	Prepare a balance sheet as of December 31, 2018. Refer to the Accounts given in the Instructions and to the lists of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading.
4.	What item appears on both the retained earnings statement and the balance sheet?