Chapter 2 Solutions

Chapter 2 Solutions - MIME 310 ENGINEERING ECONOMY...

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M I M E 3 1 0 E N G I N E E R I N G E C O N O M Y SOLUTIONS TO PROBLEM SET #2 – PRINCIPLES OF ACCOUNTING 1. i) and ii) The T accounts are set up as given and the transactions for the first month of operation of Sun Valley Realty are entered and identified. For each account, the debits and credits are totaled and the balance is determined. These balances are then used to prepare the Trial Balance. S U N V A L L E Y R E A L T Y Account Balances at End-of-month, 20XX bal. 150 bal. 500 9) 150 3) 500 Revenue from Appraisals Revenue from Commissions bal. 3700 1200 4900 bal. 200 6) 3700 bal. 11 700 12) 100 6) 1200 1) 1200 1) 11 700 7) 100 Automobile Capital Office Salary Expenses bal. 0 bal. 1725 bal. 75 275 275 4) 100 13) 50 4) 100 10) 100 2) 125 5) 25 2) 175 8) 175 1) 1500 Advertising Expenses Accounts Payable Office Equipment bal. 11 500 bal. 250 bal. 750 1) 11 500 14) 250 3300 4050 Mortgage Withdrawals 14) 250 13) 50 bal. 12 000 bal. 5000 12) 100 1) 12 000 1) 5000 10) 100 Building Land 8) 175 7) 100 11) 50 bal. 50 bal. 100 6) 2500 3) 500 2) 50 11) 50 9) 150 5) 25 1) 3500 Office Supplies Accounts Receivable C a s h 8
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Note on transaction 1 : Mary Hall's investment of $23 200 consists of cash and various assets at their fair market value. However, by transferring these assets to her new agency, the business must assume the $11 500 mortgage held by the bank on the land and building. The net amount invested in the business is thus $11 700 (23 200 - 11 500), the value recorded in the Capital account. iii) Trial Balance: S U N V A L L E Y R E A L T Y Trial Balance at End-of-month, 20XX $23 850 $23 850 75 Office Salary Expenses 200 Advertising Expenses 150 Revenue from Appraisals 500 Revenue from Commissions 250 Withdrawals 11 700 Capital 11 500 Mortgage - - Accounts Payable 12 000 Building 5 000 Land 3 750 Automobile 1 725 Office Equipment 50 Office Supplies 100 Accounts Receivable 750 Cash Credit Debit Account 2. The Balance Sheet is constructed from the state of accounts given, and the transactions are used to construct the Income Statement. i) Balance Sheet: I N - O U T U N I V E R S A L C O R P O R A T I O N Balance Sheet as of 31 December, 19XX 190 000 Total Current Assets 30 000 Inventory of finished goods 40 000 Inventory of raw materials 80 000 Accounts receivable 40 000 Cash on hand Current Assets ASSETS 9
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$690 000 Total Liabilities and Shareholders' Equity 150 000 Shareholders' Equity
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This note was uploaded on 04/25/2010 for the course MIME 310 taught by Professor Bilido during the Winter '08 term at McGill.

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Chapter 2 Solutions - MIME 310 ENGINEERING ECONOMY...

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