Chapter 1-Handout _1 Solutions

Chapter 1-Handout _1 Solutions - Chapter 1 Handout...

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Chapter 1 Handout Solutions Demonstration Problem 1-1: The Accounting Cycle The events below apply to the Cell Phone Services Company (CPSC). Assume that all transactions involve receiving or paying cash. Transactions for the year 2010: 1. The company was started when it acquired $9,000 cash by issuing common stock. 2. The company borrowed $5,000 from creditors. 3. The company provided services to customers and received $4,000. 4. The company paid expenses of $2,900. 5. The company paid $500 in dividends to its stockholders. Transactions for the year 2011: 1. The company issued additional common stock for $4,500. 2. The company paid $2,000 to reduce its liabilities to creditors. 3. The company provided services to customers and received $6,700. 4. The company paid expenses of $4,300. 5. The company paid $700 in dividends to its stockholders. Transactions for the year 2012: 1. The company issued additional common stock for $2,500. 2. The company borrowed $1,000 from creditors. 3. The company provided services to customers and received $7,400. 4. The company paid expenses of $7,900. 5. The company paid $300 in dividends to its stockholders. 6. The company paid $9,000 to purchase land. Required: For each year, a. Record the events under an accounting equation. b. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet and statement of cash flows. 1-1
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Demonstration Problem 1-1: Solution, part a. Equation Approach Effect of Events on the Accounting Equation For Year 2010 Equity Events Assets = Liabilities + Common Stock + Retained Earnings Beginning Balances $ 0 = $ 0 + $ 0 + $ 0 1. Effect of Stock Issue 9,000 9,000 2. Effect of Borrowing 5,000 5,000 3. Effect of Revenue 4,000 4,000 4. Effect of Expense (2,900) (2,900) 5. Effect of Dividends
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Chapter 1-Handout _1 Solutions - Chapter 1 Handout...

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