E X E R C I S E S LO 1 EXERCISE 1 1 USERS OF ACCOUNTING INFORMATION AND THEIR

# E x e r c i s e s lo 1 exercise 1 1 users of

This preview shows page 166 - 172 out of 198 pages.

E X E R C I S E S LO 1 EXERCISE 1-1 USERS OF ACCOUNTING INFORMATION AND THEIR NEEDS 1. Company management 2. Stockholder 3. Labor union 4. Securities and Exchange Commission 5. Banker 6. Supplier 7. Internal Revenue Service CHAPTER 1 • ACCOUNTING AS A FORM OF COMMUNICATION 1-33 LO 2 EXERCISE 1-2 THE ACCOUNTING EQUATION A = L + SE Case 1: \$125,000 = \$75,000 + SE SE = \$50,000 A = L + SE Case 2: \$400,000 = L + \$100,000 L = \$300,000 A = L + SE Case 3: A = \$320,000 + \$95,000 A = \$415,000 LO 2 EXERCISE 1-3 THE ACCOUNTING EQUATION 1. A = L + SE \$500,000 = \$250,000 + SE SE = \$250,000 2. A = L + SE (\$500,000 + \$100,000) = (\$250,000 + \$77,000) + SE SE = \$273,000 3. A = L + SE A = (\$250,000 + \$33,000) + (\$250,000* – \$58,000) A = \$283,000 + \$192,000 A = \$475,000 *From 1. above 4. A = L + SE \$1,000,000 = L + \$250,000* L = \$750,000 *From 1. above 1-34 FINANCIAL ACCOUNTING SOLUTIONS MANUAL LO 2 EXERCISE 1-4 THE ACCOUNTING EQUATION 1. A = L + SE Beginning of year \$100,000 = \$80,000 + \$20,000 + Net income + \$25,000 – Dividends 0 Stockholders’ equity at end of year \$45,000 2. A = L + SE End of year \$60,000 = \$40,000 + \$20,000 Reduce by half to beginning of year: divided by 2 Assets, beginning of year \$30,000 3. A = L + SE Beginning of year \$30,000 = \$20,000 + \$10,000 Triples during year × 3 Liabilities, end of year \$60,000 LO 2 EXERCISE 1-5 CHANGES IN STOCKHOLDERS’ EQUITY 1. First compute the amount of stockholders’ equity at the end of each year. Then, compute the change. A = L + SE 2005: \$25,000 = \$12,000 + SE SE = \$13,000 A = L + SE 2006: \$79,000 = \$67,000 + SE SE = \$12,000 A = L + SE 2007: \$184,000 = \$137,000 + SE SE = \$47,000 Change in stockholders’ equity during 2006: \$12,000 – \$13,000 = (\$1,000 ) Change in stockholders’ equity during 2007: \$47,000 – \$12,000 = \$35,000 2. 2006: (\$1,000) = Income – \$0 in dividends Net loss = \$1,000 CHAPTER 1 • ACCOUNTING AS A FORM OF COMMUNICATION 1-35 3. 2007: \$35,000 = Income – \$10,000 in dividends Net Income = \$45,000 LO 2 EXERCISE 1-6 THE ACCOUNTING EQUATION (In thousands of dollars) A = L + CS + (Beg. RE + Income Div.) Case 1: 40 = L + 10 + (15 + 8 2) Liabilities = 9 Case 2: A = 15 + 5 + (8 + 7 1) Assets = 34 Case 3: 75 = 25 + 20 + (10 + Income 3) Income = 23 Case 4: 50 = 10 + 15 + (20 + 9 Div.) Dividends = 4 LO 2 EXERCISE 1-7 CLASSIFICATION OF FINANCIAL STATEMENT ITEMS Appears on the Classified as 1. IS E 2. BS A 3. BS L 4. IS R 5. BS SE 6. BS A 7. BS A 8. IS E 9. BS SE 1-36 FINANCIAL ACCOUNTING SOLUTIONS MANUAL LO 2 EXERCISE 1-8 NET INCOME (OR LOSS) AND RETAINED EARNINGS 1. Revenue Expenses = Net Income \$25,000 (\$6,500 + \$12,000) = \$6,500 2. Retained Retained Earnings Net Earnings Beginning of + Income Dividends = End of Year Year \$8,500 + \$6,500 \$3,000 = \$ 12,000 3. Total Assets: Cash \$13,000 Accounts receivable 4,000 Supplies 500 Office equipment 7,500 Total assets \$ 25,000 4. Total Liabilities: Accounts payable \$ 5,000 5. Stockholders’ Equity: Capital stock + Retained earnings = Stockholders’ equity \$8,000 + \$12,000 = \$20,000 (Or \$25,000 in total assets less \$5,000 in total liabilities.) 6. A = L + SE \$25,000 = \$5,000 + \$20,000 LO 2 EXERCISE 1-9 STATEMENT OF RETAINED EARNINGS ACE CORPORATION STATEMENT OF RETAINED EARNINGS FOR THE MONTH ENDED FEBRUARY 28, 2007 Beginning balance, February 1, 2007 \$229,800* Add: Net income 14,000** Deduct: Cash dividends 5,000 Ending balance, February 28, 2007 \$238,800 *\$235,800 + \$83,000 – \$89,000 **\$96,000 – \$82,000 CHAPTER 1 • ACCOUNTING AS A FORM OF COMMUNICATION 1-37 LO 3 EXERCISE 1-10 ACCOUNTING PRINCIPLES AND ASSUMPTIONS 1. Going concern (also economic entity) 2. Cost principle 3. Economic entity 4. Monetary unit 5. Time period LO 5 EXERCISE 1-11 ORGANIZATIONS AND ACCOUNTING 1. Securities and Exchange Commission 2. American Accounting Association 3. Financial Accounting Standards Board 4. American Institute of Certified Public Accountants 5. International Accounting Standards Board M U LT I - C O N C E P T E X E R C I S E S LO 1,2  #### You've reached the end of your free preview.

Want to read all 198 pages?

• Fall '10
• MANAGE
• Balance Sheet, Sales, Generally Accepted Accounting Principles, liabilitys, FINANCIAL ACCOUNTING SOLUTIONS, PROCESSING ACCOUNTING INFORMATION
• • • 