Chapter. 1
1-1
As in many ethics issues, there is no one right answer. The local newspaper reported on this issue in these terms: \and the local newspaper uncovered the company's secret. The company was forced to not locate here (Collier County). It became patently clear that doing the least that is legally allowed is not enough.\ 1-2
1. B 2. B 3. E 4. F 5. B 6. F 7. X 8. E 9. X 10. B 1-3
a. $96,500 ($25,000 + $71,500) b. $67,750 ($82,750 – $15,000) c. $19,500 ($37,000 – $17,500) 1-4
a. $275,000 ($475,000 – $200,000) b. $310,000 ($275,000 + $75,000 – $40,000) c. $233,000 ($275,000 – $15,000 – $27,000) d. $465,000 ($275,000 + $125,000 + $65,000) e. Net income: $45,000 ($425,000 – $105,000 – $275,000) 1-5 a. owner's equity b.liability c.asset d.asset e.owner's equity 1-6
a. Increases assets and increases owner’s equity. b. Increases assets and increases owner’s equity. c. Decreases assets and decreases owner’s equity. d. Increases assets and increases liabilities. e. Increases assets and decreases assets.
1-7
1. increase 2. decrease 3.increase 4. decrease 1-8 a. (1) Sale of catering services for cash, $25,000. (2) Purchase of land for cash, $10,000. (3) Payment of expenses, $16,000.
(4) Purchase of supplies on account, $800. (5) Withdrawal of cash by owner, $2,000. (6) Payment of cash to creditors, $10,600.
(7)
Recognition of cost of supplies used, $1,400.
f. asset
b. $13,600 ($18,000 – $4,400) c. $5,600 ($64,100 – $58,500) d. $7,600 ($25,000 – $16,000 – $1,400) e. $5,600 ($7,600 – $2,000) 1-9
It would be incorrect to say that the business had incurred a net loss of $21,750. The excess of the withdrawals over the net income for the period is a decrease in the amount of owner’s equity in the business. 1-10
Balance sheet items: 1, 3, 4, 8, 9, 10 1-11
Income statement items: 2, 5, 6, 7 1-12
MADRAS COMPANY Statement of Owner’s Equity For the Month Ended April 30, 2006
Leo Perkins, capital, April 1, 2006 ............................. $297,200 Net income for the month ........................................... $73,000 Less withdrawals ........................................................ 12,000 Increase in owner’s equity ......................................... 61,000 Leo Perkins, capital, April 30, 2006 ........................... $358,200 1-13
HERCULES SERVICES Income Statement
For the Month Ended November 30, 2006
Fees earned ................................................................. Operating expenses: Wages expense ........................................................ Rent expense ........................................................... Supplies expense .................................................... Miscellaneous expense ........................................... Total operating expenses ................................... Net income ................................................................... 1-14
Balance sheet: b, c, e, f, h, i, j, l, m, n, o Income statement: a, d, g, k
$232,120
$100,100 35,000 4,550 3,150 142,800 $ 89,320 1-15
1. b–investing activity 2.a–operating activity 3. c–financing activity 4.a–operating activity 1-16
a. 2003: $10,209 ($30,011 – $19,802) 2002: $8,312 ($26,394 – $18,082)
b. 2003: 0.52 ($10,209 ÷ $19,802)
2002: 0.46 ($8,312 ÷ $18,082)
c. The ratio of liabilities to stockholders’ equity increased from 2002 to 2003,
indicating an increase in risk for creditors. However, the assets of The Home Depot are more than sufficient to satisfy creditor claims.
Chapter. 2
2-1
Account
Account
Accounts Payable Accounts Receivable Cash
Corey Krum, Capital Corey Krum, Drawing Fees Earned Land
Miscellaneous Expense Supplies Expense Wages Expense
Number
21 12 11 31 32 41 13 53 52 51
2-2
Balance Sheet Accounts
Income Statement Accounts
31 32
11 12 13 14 15 21 22
1. Assets Cash
Accounts Receivable Supplies
Prepaid Insurance Equipment 2. Liabilities Accounts Payable Unearned Rent 3. Owner's Equity Millard Fillmore, Capital Millard Fillmore, Drawing
41 51 52 53 59
4. Revenue Fees Earned
5. Expenses Wages Expense Rent Expense Supplies Expense
Miscellaneous Expense
2-3
a. and b.
Transaction
(1) Account Debited Type Effect asset + Account Credited Type Effect
+
owner's equity (2) asset (3) asset
(4) expense (5) asset (6) liability (7) asset (8) drawing (9)
expense
+ asset + asset liability + asset + revenue – asset + asset + asset +
asset
– – + – + – – – –