Chap001 Solution Manual

Cash balance 80 1 47 chapter 01 accounting in

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Cash balance, June 30 ............................................... \$118,080 1-47

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Chapter 01 - Accounting in Business Problem 1-9B (60 minutes) Parts 1 and 2 Assets = Liabilities + Equity Date Cash + Accounts Receivable + Office Supplies + Office Equipment + Excavating Equipment = Accounts Payable + P.Swender, Capital - P.Swender, Withdrawals + Reve- nues - Expen- ses July 1 + \$60,000 = + \$60,000 2 - 500 - \$500 Bal. 59,500 = 60,000 - 500 3 - 800 + \$4,000 + \$3,200 Bal. 58,700 + 4,000 = 3,200 + 60,000 - 500 6 - 500 + \$ 500 Bal. 58,200 + 500 + 4,000 = 3,200 + 60,000 - 500 8 + 2,200 + \$2,200 Bal. 60,400 + 500 + 4,000 = 3,200 + 60,000 + 2,200 - 500 10 + \$3,800 + 3,800 Bal. 60,400 + 500 + 3,800 + 4,000 = 7,000 + 60,000 + 2,200 - 500 15 + \$2,400 + 2,400 Bal. 60,400 + 2,400 + 500 + 3,800 + 4,000 = 7,000 + 60,000 + 4,600 - 500 17 + 1,920 + 1,920 Bal. 60,400 + 2,400 + 2,420 + 3,800 + 4,000 = 8,920 + 60,000 + 4,600 - 500 23 - 3,800 - 3,800 Bal. 56,600 + 2,400 + 2,420 + 3,800 + 4,000 = 5,120 + 60,000 + 4,600 - 500 25 5,000 + 5,000 Bal. 56,600 + 7,400 + 2,420 + 3,800 + 4,000 = 5,120 + 60,000 + 9,600 - 500 28 + 2,400 - 2,400 Bal. 59,000 + 5,000 + 2,420 + 3,800 + 4,000 = 5,120 + 60,000 + 9,600 - 500 30 - 1,260 - 1,260 Bal. 57,740 + 5,000 + 2,420 + 3,800 + 4,000 = 5,120 + 60,000 + 9,600 - 1,760 31 - 260 - 260 Bal. 57,480 + 5,000 + 2,420 + 3,800 + 4,000 = 5,120 + 60,000 + 9,600 - 2,020 31 - 1,200 - \$1,200 Bal. \$56,280 + \$ 5,000 + \$2,420 + \$3,800 + \$4,000 = \$5,120 + \$60,000 - \$1,200 + \$9,600 - \$2,020 1-48
Chapter 01 - Accounting in Business Problem 1-9B- continued Part 3 SWENDER EXCAVATING CO. Income Statement For Month Ended July 31 Revenues: Excavating fees earned ............................ \$9,600 Expenses: Rent expense ............................................. \$ 500 Salaries expense ....................................... 1,260 Utilities expense ....................................... 260 Total expenses .......................................... 2,020 Net income ......................................................... \$7,580 SWENDER EXCAVATING CO. Statement of Owner’s Equity For Month Ended July 31 P. Swender, Capital, July 1 ....................... \$ 0 Plus: Investment by owner………………. 60,000 Net income ...................................... 7,580 67,580 Less: Owner withdrawals ......................... 1,200 P. Swender, Capital, July 31 ..................... \$66,380 SWENDER EXCAVATING CO. Balance Sheet July 31 Assets Liabilities Cash ............... \$56,280Accounts payable .................................. \$ 5,120 Accounts receivable ............. 5,000 Office supplies ...................... 2,420 Equity Office equipment .................. 3,800 Excavating equipment .......... 4,000 P. Swender, Capital ........... 66,380 Total assets ........................... \$71,500 Total liabilities & equity .... \$71,500 1-49

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Chapter 01 - Accounting in Business Problem 1-9B (Concluded) Part 3—continued SWENDER EXCAVATING CO. Statement of Cash Flows For Month Ended July 31 Cash flows from operating activities: Cash received from customers .................................. \$4,600 Cash paid for rent ....................................................... (500) Cash paid for supplies ............................................... (500) Cash paid for utilities ................................................. (260) Cash paid to employees ............................................. (1,260 ) Net cash provided by operating activities ................. \$2,080 Cash flows from investing activities: Purchase of excavating equipment ........................... (800) Purchase of office equipment .................................... (3,800) Net cash used by investing activities ........................ (4,600) Cash flows from financing activities: Cash invested by owner ............................................. 60,000 Cash withdrawal by owner ......................................... (1,200) Net cash provided by financing activities ................. 58,800 Net increase in cash ................................................... \$56,280 Cash balance, July 1 ................................................... 0 Cash balance, July 31 ................................................. \$56,280 Part 4 If the \$4,000 purchase on July 1 had been acquired through an additional owner investment of cash, then: (a) total assets would be larger by \$800, (b) total liabilities would be \$3,200 smaller, and (c) equity would be \$4,000 larger. 1-50
Chapter 01 - Accounting in Business Problem 1-10B (20 minutes) 1. Return on assets is net income divided by average total assets (the average amount invested). For Aspen Company this return is computed as: \$100,000 / \$2,000,000 = 0.05 or 5% . 2. Return on assets does not seem satisfactory for the risk involved in the manufacturing, marketing, and selling of snowmobile equipment. Aspen Company’s 5% return is about one-half of the 9.5% return earned by its competitors. 3. We know that sales less expenses equal net income. Taking the sales and net income numbers for Aspen Company we obtain: \$1,200,000 - Expenses = \$100,000 Expenses must equal \$1,100,000 .

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