Demonstration_Problem_2_Solutions

Demonstration_Problem_2_Solutions - Demonstration Problem...

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Demonstration Problem 2-1 Solution, part 1. Accounting Equation Assets = Liabilities + Equity Part A, 2003 Cash + Accts. Receiv. = Liabilities + Common Stock + Retained Earnings Beginning Balances $ -0- $ -0- $ -0- $ -0- $ -0- 1. Effect of Recognizing Rev. 5,000 5,000 Part B, 2004 1. Effect of Cash Collection 5,000 (5,000) ───── ──── ──── ───── ───── Ending Balances $5,000 + $ -0- = $ -0- + $ -0- + $5,000 ═════ ════ ═════ ═════ ═════ Demonstration Problem 2-1 Solution, part 2. Financial Statements Packard Consultants Income Statements For the Years Ended December 31, 2003 2004 Consulting Revenue $5,000 $-0- Expenses -0- -0- Net Income $5,000 $-0- Statements of Retained Earnings Beginning Retained Earnings $ -0- $5,000 Net Income 5,000 -0- Dividends -0- -0- Ending Retained Earnings $5,000 $5,000 Balance Sheets at December 31 Assets Cash $ -0- $5,000 Accounts Receivable 5,000 -0- Total Assets $5,000 $5,000 Equity Retained Earnings $5,000 $5,000 Statements of Cash Flows Cash Flows from Operating Activities $ -0- $5,000 Cash Flows from Investing Activities -0- -0- Cash Flows from Financing Activities -0- -0- Net Change in Cash -0- $5,000 Beginning Cash Balance -0- -0- Ending Cash Balance $ -0- $5,000 1
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Demonstration Problem 2-2 Solution, part 1. Accounting Equation Assets = Liab. + Equity 2003 Cash + Inv. Sec. = Notes Payable + Int. Pay. + Com. Stock + Ret. Ear. Beginning Balances $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- 1. Effect of Borrowing 10,000 10,000 2. Purch. of Securities (10,000) 10,000 3. Earned Revenue 600 600 4. Accrued Int. Exp. 400 (400) ───── ──── ──── ──── ───── ───── End. / Beg. Balances $ 600 + $10,000 = $10,000 + $ 400 + $ -0- + $ 200 2004 1. Earned Revenue 1,350
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This note was uploaded on 04/07/2008 for the course ACCT 101 taught by Professor Jankiewics during the Spring '08 term at Maryland.

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Demonstration_Problem_2_Solutions - Demonstration Problem...

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