wk1 answers - ACC 201 Week One Assignment One Solutions...

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ACC 201 Week One Assignment One Solutions EXERCISE 1-2 a. Investors put assets into the company with the expectation of sharing profits. Creditors lend assets to the company with the expectation of repayment of the principal plus interest on the loan. b. Kennedy Company Accounting Equation Event Assets = Liabilities + Stockholders’ Equity Cash Notes Payable Common Stock Retained Earnings Acquired assets $3,400 $1,600 $1,800 Incurred loss (1,600)
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(1,600) Balance $1,800 = $1,600 + $1,800 $(1,600) The cash balance of $1,800 will be distributed first to the creditors. Since the company owed $1,600 to creditors and there are sufficient funds to pay them, the creditors will receive $1,600. The investors will receive the balance of $200. c. Kennedy Company Accounting Equation Event Assets = Liabilities + Stockholders’ Equity Cash Notes Payable Common Stock Retained Earnings Acquired assets $3,400 $1,600 $1,800
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earned profit 1,600 1,600 Balance $5,000 = $1,600 + $1,800 $1,600 The creditor will receive the $1,600 that is owed to them. The stockholders will receive their initial investment of $1,800 plus an additional $1,600 of profit for a total of $3,400. EXERCISE 1-4 Entities Distribution of Cash Mr. Chang (personal account) Personal account was decreased by the $30,000 cash deposited in the Chang Enterprises’ business account. Chang Enterprises Cash account increased by the $30,000 cash deposited by Mr. Chang. Cash account increased by $40,000 cash borrowed from First Bank. Cash account increased by $64,000 cash invested by Jim Harwood. Cash account decreased by $120,000 cash used to purchase building. Cash account increased by $28,000 cash revenue earned. Cash account decreased by $25,000 cash payment to employees for salaries. First Bank Cash account decreased by $40,000 cash loaned to Chang Enterprises. Jim Harwood, father-in-law, personal account Cash decreased by $64,000 cash invested in Chang Enterprises. Morton Realty Company
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This note was uploaded on 09/08/2011 for the course ACC 201 taught by Professor Alao during the Spring '10 term at Ashford University.

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wk1 answers - ACC 201 Week One Assignment One Solutions...

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