Chap001 Solution Manual

# Problem 1 14a b 15 minutes 1 f 5 i 2 i 6 o 3 i 7 o 4

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Problem 1-14A B (15 minutes) 1. F 5. I 2. I 6. O 3. I 7. O 4. F 8. O 1-38

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Chapter 01 - Accounting in Business PROBLEM SET B Problem 1-1B (25 minutes) Balance Sheet Income Statement Statement of Cash Flows Transaction Total Assets Total Liab. Owner Equity Net Income Operating Activities Financing Activities Investing Activities 1 Owner invests cash + + + 2 Buys building by signing note payable + + 3 Pays cash for salaries incurred 4 Provides ser- vices for cash + + + + 5 Pays cash for rent incurred 6 Incurs utilities costs on credit + 7 B uys store equip- ment for cash +/– 8 Owner withdraws cash 9 Provides ser- vices on credit + + + 10 Collects cash on r eceivable from (9) +/– + 1-39
Chapter 01 - Accounting in Business Problem 1-2B (40 minutes) Part 1 Company V: (a) and (b) Calculation of equity: 12/31/2010 12/31/2011 Assets ............................. \$45,000 \$49,000 Liabilities ........................ (30,000 ) (26,000 ) Equity .............................. \$15,000 \$23,000 (c) Calculation of net income for 2010: Equity, December 31, 2010 ....................... \$15,000 Plus owner investments ........................... 6,000 Plus net income ......................................... ? Less owner withdrawals ........................... (4,500 ) Equity, December 31, 2011 ...................... \$23,000 Therefore, net income must have been \$ 6,500 Part 2 Company W: (a) Calculation of Equity at December 31, 2010: Assets ........................................................ \$70,000 Liabilities ................................................... (50,000 ) Equity ......................................................... \$20,000 (b) Calculation of Equity at December 31, 2011: Equity, December 31, 2010 ....................... \$20,000 Plus owner investments ........................... 10,000 Plus net income ......................................... 30,000 Less owner withdrawals ........................... (2,000 ) Equity, December 31, 2011 ....................... \$58,000 (c) Calculation of the amount of liabilities at December 31, 2011: Assets ........................................................ \$90,000 Equity ......................................................... (58,000 ) Liabilities ................................................... \$32,000 1-40

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Chapter 01 - Accounting in Business Problem 1-2B (Continued) Part 3 Company X: First, calculate the beginning and ending equity balances: 12/31/2010 12/31/2011 Assets ............................. \$121,500 \$136,500 Liabilities ........................ (58,500 ) (55,500 ) Equity .............................. \$ 63,000 \$ 81,000 Then, find the amount of owner investments during 2011 as follows: Equity, December 31, 2010 ............................... \$ 63,000 Plus owner investments ................................... ? Plus net income ................................................ 16,500 Less owner withdrawals ............................... 0 Equity, December 31, 2011 ............................... \$81,000 Thus, the owner investments must have been \$ 1,500 Part 4 Company Y: First, calculate the beginning balance of equity: Dec. 31, 2010 Assets ........................................................ \$82,500 Liabilities ................................................... 61,500 Equity ......................................................... \$21,000 Next, find the ending balance of equity as follows: Equity, December 31, 2010 ....................... \$21,000 Plus owner investments ........................... 38,100 Plus net income ......................................... 24,000 Less owner withdrawals ........................... (18,000 ) Equity, December 31, 2011 ....................... \$65,100 Finally, find the ending amount of assets by adding the ending balance of equity to the ending balance of liabilities: Dec. 31, 2011 Liabilities ................................................... \$ 72,000 Equity ......................................................... 65,100 Assets ........................................................ \$137,100 1-41
Chapter 01 - Accounting in Business Problem 1-2B (Concluded) Part 5 Company Z: First, calculate the balance of equity as of December 31, 2011: Assets ........................................................ \$160,000 Liabilities ................................................... (52,000 ) Equity ......................................................... \$108,000 Next, find the beginning balance of equity as follows: Equity, December 31, 2010 ....................... \$ ? Plus owner investments ........................... 40,000 Plus net income ......................................... 32,000 Less owner withdrawals .......................... (6,000 ) Equity, December 31, 2011 ....................... \$108,000 Thus, the beginning balance of equity is \$42,000 . Finally, find the beginning amount of liabilities by subtracting the beginning balance of equity from the beginning balance of assets: Dec. 31, 2010 Assets ........................................................ \$124,000 Equity ......................................................... (42,000 ) Liabilities ................................................... \$ 82,000 Problem 1-3B (15 minutes) RWB Company Balance Sheet December 31, 2011 Assets ..... \$114,000 Liabilities ................................ \$ 74,000 Equity .................................... 40,000 Total assets .................. \$114,000 Total liabilities and equity .... \$114,000 1-42

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Chapter 01 - Accounting in Business Problem 1-4B (15 minutes) Online Co.
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