horngren_accounting_6e_stop_and_think_answers

horngren_accounting_6e_stop_and_think_answers - Horngren...

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Unformatted text preview: Horngren Accounting 6e ANSWERS TO ‘Stop & Think’ QUESTIONS CHAPTER 1 1-1 According to the cost principle, assets and services should be recorded at their actual cost. As $56 000 was paid for the land, report the land at $56 000. 1-2 To answer both questions, use the accounting equation: 1. Assets – Liabilities = Owners’ Equity $370 000 – $280 000 = $90 000 2. Assets = Liabilities + Owners’ Equity $88 000 = $36 000 + $52 000 1-3 Paula Lee eTravel Balance Sheet as at 9 April 20X7 A s s e t s L i a b i l i t i e s Cash at bank $10 000 Accounts payable $500 Office supplies 500 Land 20 000 Owners’ Equity Paula Lee, capital 30 000 Total assets $30 500 Total liabilities and owners’ equity $30 500 CHAPTER 2 2-1 Assets = Liabilities + Owners’ Equity $30 000 = $18 000 + $12 000 2-2 Paula Lee eTravel Balance Sheet as at 1 April 20X7 Assets Total Liabilities Cash at bank $30 000 None $ 0 Owners’ Equity P a u l a L e e , c a p i t a l 30 000 Total assets $30 000 Total liabilities and owners’ equity $30 000 2-3 1. Cash at Bank (an asset) decreases by $2 600. Accounts Payable (a liability) decreases by $2 600. To decrease an asset, we record a credit. To decrease a liability, we use a debit. 2. The journal entry is: Accounts Payable (liability; debit) 2 600 Cash at Bank (asset; credit) 2 600 Made payment on account. 2-4 1. The ending balance ( X ) for Cash at Bank is: X = $10 000 + $20 000 – $13 000 X = $17 000 2. We are given the beginning and ending balances. We can calculate the credit entry ( X ) as follows for Accounts Receivable: $12 800 + $45 600 – X = $23 500 $58 400 – $23 500 = X X = $34 900 3. The Capital account has an ending credit balance of $73 000. We can figure the beginning credit balance ( X ) as follows: X + $56 000 + $15 000 – $22 000 = $73 000 X = $73 000 – $56 000 – $15 000 + $22 000 X = $24 000 CHAPTER 3 3-1 Jan. Feb. Mar. (a) Accrual accounting: Service revenue $2 000 $2 000 $2 000 (b) Cash-basis accounting: Service revenue $6 000 Oct. Nov. Dec. (a) Accrual accounting: Advertising expense $3 000 $3 000 $3 000 (b) Cash-basis accounting: Advertising expense $9 000 3-2 Paula Lee Capital Account per Exhibit 2-12 30 000 Add: Revenues in June 8 500 Less: Expenses Computer 600 Office 1 100 Salary 1 200 Electricity and gas 400 Drawings 2 000 Withdrawal of capital 1 950 7250 Paula Lee Capital Account per Exhibit 3-1 31 250 3-3 3-4 3-5 3-6 . CHAPTER 4 4-1 A classified balance sheet indicates the following to (a) Paula Lee and (b) a banker: ¾ Paula Lee’s liabilities, and the dollar amounts, that Paula Lee must pay within the next year. ¾ Which of Paula Lee’s assets are the most liquid and thus available to pay the liabilities....
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This note was uploaded on 08/18/2011 for the course MKTG 1001 taught by Professor ? during the Three '09 term at University of Sydney.

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horngren_accounting_6e_stop_and_think_answers - Horngren...

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