1 - SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 1 EXERCISE...

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SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 1 EXERCISE 1-1A The three participants in the free business market are: 1.  Resource owners 2.  Conversion agents 3.  Consumers Note to instructor: The memo should discuss the fact that the resource owners are those who  own resources that are desired by others, either in the original form or in a  converted form.  The conversion agents are the parties that acquire the  resource and supply it to consumers either in the original form or in a  converted form with value added by the conversion.  The consumers are  the ultimate users of the resources. 1-7
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EXERCISE 1-2A a.  A business liquidation occurs when a business ceases activity and  divides the remaining assets between the resource providers (i.e.  creditors and investors).   b.  Mallory Company Accounting Equation Event Assets = Liabilities   + Stockholders’ Equity Common  Stock Retained  Earnings Acquired assets $1,600 $700 $900 Incurred loss (1,000) (1,000) Balance $   600 = $700 + $900 $(1,000) The cash balance of $600 will be distributed first to the creditors.   The creditors will only receive $600 of the $700 they are owed. c.  The stockholders will not receive any amount because all of the cash  was paid to the creditors. 1-8
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EXERCISE 1-3A Entities Distribution of Cash Mr. Pierno (personal  account) Personal account was decreased by the $15,000  cash deposited in the Pierno Enterprises’  business account. Pierno Enterprises Cash account increased by the $15,000 cash  deposited by Mr. Pierno. Cash account increased by $20,000 cash  borrowed from State Bank of Renu. Cash account increased by $32,000 cash invested  by Edward Goebel. Cash account decreased by $60,000 cash used to  purchase building. Cash account increased by $28,000 cash revenue  earned. Cash account decreased by $17,000 cash payment  to employees for salaries. State Bank of Renu Cash account decreased by $20,000 cash loaned  to Pierno Enterprises. Edward Goebel,  father-in-law, personal  account Cash decreased by $32,000 cash invested in  Pierno Enterprises. Stokes Realty  Company Cash increased by $60,000 received from Pierno  Enterprises to purchase building. Pierno Enterprises’  customers Cash decreased by $28,000 when customers paid  for services performed. Pierno Enterprises’  employees Cash increased by $17,000 when employees  received payment for salaries. 1-9
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EXERCISE 1-4A The memo should contain a listing and explanation of the ten elements of  financial statements:  Assets Liabilities Equity Contributed Capital Revenue Expenses Distributions Net Income Gains and Losses The elements of financial statements are broad classifications that are 
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1 - SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 1 EXERCISE...

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