EXAM 1 SOLUTION

EXAM 1 SOLUTION - Management 1A Summer 2004 Danny S. Litt...

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Management 1A Summer 2004 Danny S. Litt EXAM 1 SOLUTION Name: ________________ Student ID No. _________________ I agree to have my grade posted by Student ID Number. ___________________ (Signature) 1 20 2 20 3 20 4 20 5 20 6 20 7 20 8 20 9 20 10 20 TOTAL 200
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MANAGEMENT 1A NAME: __________________________ Problem 1 Joe Cole decides to open a cleaning and laundry service near the local college campus that will operate as a sole proprietorship. Analyze the following transactions for the month of June in terms of their effect on the basic accounting equation. Record each transaction by increasing (+) or decreasing (–) the dollar amount of each item affected. Indicate the new balance of each item after a transaction is recorded. It is not necessary to identify the cause of changes in owner's equity. Transactions (1) Joe Cole invests $20,000 in cash to start a cleaning and laundry business on June 1. (Given) (2) Purchased laundry equipment for $7,000 paying $4,000 in cash and the remainder due in 30 days. (3) Purchased laundry supplies for $1,200 cash. (4) Received a bill from Campus News for $200 for advertising in the campus newspaper. (5) Cash receipts from customers for cleaning and laundry amounted to $1,500. (6) Paid salaries of $400 to student workers. (7) Billed the Tiger Football Team $100 for cleaning and laundry services. (8) Paid $200 to Campus News for advertising that was previously billed in Transaction 4. (9) Joe Cole withdrew $900 from the business for living expenses. (10) Incurred utility expenses for month on account, $400. Trans- Accounts Laundry Laundry Accounts J. Cole action Cash + Receivable + Supplies + Equipment = Payable + Capital (1) +$20,000 +$20,000 ___________________________________________________________________________________________ Balance $20,000 $20,000 (2) – 4,000 +$7,000 +$3,000 ___________________________________________________________________________________________ Balance $16,000 $7,000 $3,000 $20,000 (3) – 1,200 +$1,200 ___________________________________________________________________________________________ Balance $14,800 $1,200 $7,000 $3,000 $20,000 (4) + 200 200 ___________________________________________________________________________________________ Balance $14,800 $1,200 $7,000 $3,200 $19,800 (5) + 1,500 + 1,500 ___________________________________________________________________________________________ Balance $16,300 $1,200 $7,000 $3,200 $21,300 (6) 400 400 ___________________________________________________________________________________________ Balance $15,900 $1,200 $7,000 $3,200 $20,900 (7) +$100 + 100 ___________________________________________________________________________________________ Balance $15,900 $100 $1,200 $7,000 $3,200 $21,000 (8) 200 200 ___________________________________________________________________________________________ Balance $15,700 $100 $1,200 $7,000 $3,000 $21,000 (9) 900 900 ___________________________________________________________________________________________ Balance $14,800 $100 $1,200 $7,000 $3,000 $20,100 (10) + 400 400 ___________________________________________________________________________________________ Totals $14,800 $100 $1,200 $7,000 $3,400 $19,700 Page 1
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MANAGEMENT 1A NAME: __________________________ Problem 2 A service proprietorship shows five transactions summarized below. The effect of each transaction on the accounting equation is shown, and also the new balance of each item in the equation. For each transaction (a) to (e) write an explanation of the nature of the transaction. Accounts Equip- Accounts Cash + Rec. + ment + Land + Building = Payable + Capital $5,000 $6,500 $10,000 $7,500 $50,000 $3,000 $76,000 a) –2,000 –2,000 3,000 6,500 10,000 7,500 50,000 1,000 76,000 b) +1,000 – 1,000 4,000 5,500 10,000 7,500 50,000 1,000 76,000 c) + 5,000 +5,000 4,000 5,500 15,000 7,500 50,000 6,000 76,000 d) +2,500 + 2,500 6,500 5,500 15,000 7,500 50,000 6,000 78,500 e) +3,000 + 3,000 $6,500 $8,500 $15,000 $7,500 $50,000 $6,000 $81,500 Journal Entry Explanation: (a) Paid cash to creditors.
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This note was uploaded on 07/09/2008 for the course MGMT 1A taught by Professor Litt during the Summer '08 term at UCLA.

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EXAM 1 SOLUTION - Management 1A Summer 2004 Danny S. Litt...

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