ch2 - SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 2...

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Unformatted text preview: SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 2 EXERCISE 2-1A a. Hamby, Inc. General Ledger Accounts for the Year Ended December 31, 2003 Assets = Liabilitie s + Stockholders Equity Event Cash Account s Rec. = Salaries Pay. + Common Stock Retained Earnings Acct. Title for RE 1. 15,000 15,000 2. 48,000 48,000 Revenue 3. (1,250) (1,250) Util. Exp. 4. 36,000 (36,000) 5. 8,000 (8,000) Sal. Exp. 6. (1,000) (1,000) Dividends Totals 48,750 12,000 = 8,000 + 15,000 37,750 b. Hamby, Inc. Income Statement For the Year Ended December 31, 2003 Revenue $48,000 Expenses Utility Expense $1,250 Salaries Expense 8,000 Total Expenses (9,250) 2- 7 Net Income $38,750 2- 8 EXERCISE 2-1 b. (cont.) Hamby, Inc. Statement of Changes in Stockholders Equity For the Year Ended December 31, 2003 Beginning Common Stock $ -0- Plus: Common Stock Issued 15,000 Ending Common Stock $15,000 Beginning Retained Earnings-0- Plus: Net Income 38,750 Less: Dividends (1,000) Ending Retained Earnings 37,750 Total Stockholders Equity $52,750 Hamby, Inc. Balance Sheet As of December 31, 2003 Assets Cash $48,750 Accounts Receivable 12,000 Total Assets $60,750 Liabilities Salaries Payable $ 8,000 Total Liabilities $ 8,000 Stockholders Equity Common Stock 15,000 2- 9 Retained Earnings 37,750 Total Stockholders Equity 52,750 Total Liab. and Stockholders Equity $60,750 2- 10 EXERCISE 2-1A b. (cont.) Hamby, Inc. Statement of Cash Flows For the Year Ended December 31, 2003 Cash Flow From Operating Activities Cash Receipts from Customers $36,000 Cash Paid for Expenses (1,250) Net Cash Flow from Operating Act. $34,750 Cash Flow From Investing Activities-0- Cash Flow From Financing Activities Issue of Stock 15,000 Paid Dividends (1,000) Net Cash Flow from Financing Act. 14,000 Net Change in Cash 48,750 Plus: Beginning Cash Balance-0- Ending Cash Balance $48,750 c. Net income is based on income earned of $48,000 and expenses incurred of $9,250 for a net income of $38,750. Net cash flow from operating activities is based on cash collected from revenue, $36,000 and expenses paid, $1,250, for a net cash flow from operating activities of $34,750. The difference of $4,000 is reflected in the Accounts Receivable account ($12,000), revenues accrued but not yet collected, and the Accounts Payable account ($8,000), expenses incurred but not paid. 2- 11 EXERCISE 2-2A Pilgrim Company Effect of Events on the 2008 Accounting Equation Assets = Liabilities + Stockholders Equity Event Cash + Accounts Rec. = + Common Stock + Retained Earnings Earned Revenue 6,000 6,000 Coll. Acct. Rec. 5,200 (5,200) Ending Balance 5,200 + 800 =-0- +-0- + 6,000 a. Accounts Receivable: $6,000 $5,200 = $800 b. $6,000 c. $5,200 cash collected from accounts receivable.c....
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ch2 - SOLUTIONS TO EXERCISES - SERIES A - CHAPTER 2...

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