Chap001 Solution Manual

# 50400 22000 12000 60000 2000 1600 e 7000 7000 bal

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50,400 + + 22,000 = 12,000 + 60,000 + 2,000 – 1,600 e. _______ + \$7,000 ______ _______ ______ + 7,000 _____ Bal. 50,400 + 7,000 + 22,000 = 12,000 + 60,000 + 9,000 – 1,600 f. 8,000 ______ + 8,000 _______ ______ _____ _____ Bal. 42,400 + 7,000 + 30,000 = 12,000 + 60,000 + 9,000 – 1,600 g. 2,400 ______ ______ _______ ______ _____ 2,400 Bal. 40,000 + 7,000 + 30,000 = 12,000 + 60,000 + 9,000 – 4,000 h. + 5,000 - 5,000 ______ _______ ______ _____ _____ Bal. 45,000 + 2,000 + 30,000 = 12,000 + 60,000 + 9,000 – 4,000 i. 12,000 ______ ______ 12,000 ______ _____ _____ Bal. 33,000 + 2,000 + 30,000 = 0 + 60,000 + 9,000 – 4,000 j. 500 ______ ______ _______ ______ – \$500 _____ _____ Bal. \$32,500 + \$2,000 + \$30,000 = \$ 0 + \$60,000 \$500 + \$9,000 \$4,000 Exercise 1-12 (20 minutes) a. Started the business with the owner investing \$20,000 cash. b. Purchased office supplies for \$1,500 by paying \$1,000 cash and putting the remaining \$500 balance on credit. c. Purchased office furniture by paying \$8,000 cash. d. Billed a customer \$3,000 for services earned. e. Provided services for \$500 cash. 1-16

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Chapter 01 - Accounting in Business Exercise 1-13 (15 minutes) a. Purchased land for \$2,000 cash. b. Purchased \$500 of office supplies on credit. c. Billed a client \$950 for services provided. d. Paid the \$500 account payable created by the credit purchase of office supplies in transaction b . e. Collected \$950 cash for the billing in transaction c . Exercise 1-14 (15 minutes) REAL SOLUTIONS Income Statement For Month Ended October 31 Revenues: Consulting fees earned ................... \$15,000 Expenses: Salaries expense ............................. \$6,000 Rent expense ................................... 2,550 Miscellaneous expenses ................. 680 Telephone expense ......................... 660 Total expenses ................................ 9,890 Net income ................................................. \$ 5,110 Exercise 1-15 (15 minutes) REAL SOLUTIONS Statement of Owner’s Equity For Month Ended October 31 N. King, Capital, Oct. 1 .................................... \$ 0 Add: Investments by owner……………… ...... 74,000 Net income (from Exercise 1-14) ............. 5,110 79,110 Less: Withdrawals by owner .......................... 3,360 N. King , Capital, Oct. 31 ................................. \$75,750 1-17
Chapter 01 - Accounting in Business Exercise 1-16 (15 minutes) REAL SOLUTIONS Balance Sheet October 31 Assets Liabilities Cash .............................. \$ 2,000 Accounts payable ................. \$ 7,500 Accounts receivable .... 13,000 Office supplies ............. 4,250 Equity Office equipment .......... 28,000 N. King, Capital* .................... 75,750 Land .............................. 36,000 Total assets .................. \$83,250 Total liabilities and equity .... \$83,250 * Computation of amount from Exercise 1-15. Exercise 1-17 (15 minutes) REAL SOLUTIONS Statement of Cash Flows For Month Ended October 31 Cash flows from operating activities Cash received from customers ........................................... \$ 2,000 Cash paid to employees ...................................................... (2,750) Cash paid for rent ................................................................ (2,550) Cash paid for telephone expenses ..................................... (660) Cash paid for miscellaneous expenses .............................. (680 ) Net cash used by operating activities ................................ ( 4,640) Cash flows from investing activities Purchase of office equipment ............................................. (28,000 ) Net cash used by investing activities ............................... (28,000) Cash flows from financing activities Owner’s cash investments .................................................. 38,000 Owner’s cash withdrawals .................................................. (3,360 ) Net cash provided by financing activities .......................... 34,640 Net increase in cash ............................................................ \$ 2,000 Cash balance, October 1 ..................................................... 0 Cash balance, October 31 ................................................... \$ 2,000 1-18

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Chapter 01 - Accounting in Business Exercise 1-18 (10 minutes) Return on assets = Net income / Average total assets = \$20,000 / [(\$100,000 + \$150,000)/2] = 16% Interpretation: Geneva Group’s return on assets of 16% is markedly above the 10% return of its competitors. Accordingly, its performance is assessed as superior to its competitors. Exercise 1-19 (10 minutes) A 1. Cash paid for wages A 5. C ash paid on an account payable C 2. Cash withdrawal by owner C 6. Cash investment by owner B 3. Cash purchase of equipment A 7. Cash received from clients A 4. Cash paid for advertising A 8. Cash paid for rent Exercise 1-20 B (10 minutes) 1. F Financing* 2. I Investing 3. O Operating 4. F Financing 5. I Investing * Would also be listed as “investing” if resources contributed by owner were in the form of non-financial resources.
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