ch2solutions - Chapter 02 Accounting for Accruals EXERCISE...

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Unformatted text preview: Chapter 02 Accounting for Accruals EXERCISE 2-2A Venture Company Effect of Events on the 2008 Accounting Equation Assets = Liabilities + Stockholders Equity Event Cash + Accounts Rec. = + Common Stock + Retained Earnings Earned Revenue 8,000 8,000 Coll. Acct. Rec. 5,200 (5,200) Ending Balance 5,200 + 2,800 =-0- +-0- + 8,000 e. Accounts Receivable: $8,000 $5,200 = 2,800 f. $8,000 g. $5,200 cash collected from accounts receivable. h. $8,000 i. $8,000 of revenue was earned but only $5,200 of it was collected. j. The $8,000 is recorded in the Service Revenue account at the time it is recognized and transferred to the Retained Earnings account during the closing process on December 31, 2008. The Service Revenue account has an $8,000 balance before closing and a zero balance after closing. The Retained Earnings account has a zero balance before closing and an $8,000 balance after closing. 2- 7 EXERCISE 2-5A a. Event Classification 1. FA 2. NA 3. NA 4. OA 5. FA 6. OA 7. OA 8. OA b. Traci Company Statement of Cash Flows For the Year Ended December 31, 2008 Cash Flows From Operating Activities: Cash from the collection of accts. rec. $37,000 Cash from service revenue 9,000 Cash payment on accounts payable (18,000) Cash payments for rent (2,000) Net Cash Flow from Operating Activities $26,000 Cash Flows From Investing Activities-0- Cash Flows From Financing Activities: Cash receipt from stock issue 30,000 Cash payment for dividends (2,000) Net Cash Flow from Financing Activities 28,000 Net Change in Cash 54,000 2- 9 Plus: Beginning Cash Balance-0- Ending Cash Balance $54,000 2- 9 EXERCISE 2-6A a. Brown and Bergin Statements Model For the 2007 Accounting Year Balance Sheet Income Statement Statement of Even t Assets = Liabilities +R e v . Exp. = Net Inc. Cash Flows No. Cash + Accts. Rec. = Acct. Payable + Sal. Pay. + Retained Earnings 1. NA 96,000 NA NA 96,000 96,000 NA 9 6 , NA 2. 65,00 NA NA NA 65,000 65,000 NA 6 5 , 65,000 OA 3. NA NA 45,000 NA (45,000) NA 45,00 ( 4 5 , ) NA 4. (26,0 00) NA NA NA (26,000) NA 26,00 ( 2 6 , ) (26,000) OA 5. 70,00 (70,000) NA NA NA NA NA N A 70,000 OA 6. (38,0 00) NA (38,000) NA NA NA NA N A (38,000) OA 7. (10,0 00) NA NA NA (10,000) NA NA N A (10,000) FA 8. NA NA NA 3,000 (3,000) NA 3,000 ( 3 , NA ) Totals 61,00 + 26,000 = 7,000 + 3,000+ 77,000 161,000- 74,00 = 8 7 , 61,000 NC b. Total assets: $87,000 ($61,000 + $26,000)b....
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This note was uploaded on 11/05/2009 for the course COB 241 taught by Professor Manktalow during the Fall '08 term at James Madison University.

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ch2solutions - Chapter 02 Accounting for Accruals EXERCISE...

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