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Ch 1 - CHAPTER 1 Suggested Problems Introduction to...

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CHAPTER 1 Suggested Problems Introduction to Financial Statements SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 1-1 (a) P Shared control, tax advantages, increased skills and resources. (b) SP Simple to set up and maintains control with founder. (c) C Easier to transfer ownership and raise funds, no personal liability. BRIEF EXERCISE 1-4 E (a) Advertising expense R (b) Service revenue E (c) Insurance expense E (d) Salaries expense D (e) Dividends R (f) Rent revenue E (g) Utilities expense NSE (h) Paid cash to purchase equipment C (i) Received cash from investors in exchange for common stock. BRIEF EXERCISE 1-7 I (a) Revenue during the period. B (b) Supplies on hand at the end of the year. C (c) Cash received from issuing new bonds during the period. B (d) Total debts outstanding at the end of the period. BRIEF EXERCISE 1-8 (a) $90,000 + $230,000 = $320,000 (Total assets) (b) $170,000 – $90,000 = $80,000 (Total liabilities) (c) $700,000 – 0.5($700,000) = $350,000 (Stockholders’ equity)
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BRIEF EXERCISE 1-10 A (a) Accounts receivable L (b) Salaries payable A (c) Equipment A (d) Office supplies SE (e) Common stock L (f) Notes payable SOLUTIONS TO EXERCISES EXERCISE 1-1 (a) 8. Auditor’s opinion (b) 1. Corporation (c) 6. Common stock (d) 7. Accounts payable (e) 3. Accounts receivable (f) 2. Creditor (g) 5. Stockholder (h) 4. Partnership EXERCISE 1-3 (a) (b)
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