209. For each of the following transactions, identify the effects as reflected in the accounting
equation. Use “+” to indicate an increase and “-” to indicate a decrease. Use “A”, “L”, and “E”
to indicate assets, liabilities, and equity, respectively. Part A has been completed as an
example.
a.
L. Berryman invested $100,000 in
a sole proprietorship
+A
+E
b.
Land was purchased for $50,000.
A down payment of $15,000 cash
was made and a note was signed
for the balance.
c.
Services were rendered to
customers for cash.
d.
A building was purchased for
cash.
e.
Supplies were purchased for cash.
f.
Paid the office secretary’s salary.
g.
The amount owed on the land
from Part (b) was paid.
210. The following schedule reflects shows the first month’s transactions of the Bill Blue Real
Estate Company:
Accounts
Accounts
B. Blue
+
Receivable
+
Supplies
+
Equipment
=
Payable
+
Capital
1.
+20,000
2.
+5,000
3.
+$1,500
+1,500
4.
+3,000
5.
+1,500
+2,500
6.
-750
7.
-500
8.
-400
-400
9.
-2,000
Provide descriptions for each transaction.
1-83
211. The accountant of Magic Video Games prepared a balance sheet immediately after each
transaction was recorded. During September, the first month of operation, the following
balance sheets were prepared:
MAGIC VIDEO GAMES
Balance Sheet
September 1
Assets
Equity
Cash……………………..
$60,000
I. Magic,
Capital……………..
$60,000
Total assets………………
$60,000
Total liabilities
and
equity……………………..
$60,000
MAGIC VIDEO GAMES
Balance Sheet
September 5
Assets
Liabilities
Cash…………………….
$48,000
Notes payable…….
$18,000
Land…………………….
10,000
Equity
Building…………………
20,000
I. Magic, Capital…..
60,000
Total assets…………..
$78,000
Total liabilities and
equity……………..
$78,000
MAGIC VIDEO GAMES
Balance Sheet
September 9
Assets
Liabilities
Cash…………………….
$48,000
Accounts payable….
$2,000
Office supplies…………
2,000
Notes payable…….
18,000
Land…………………….
10,000
Equity
Building…………………
20,000
I. Magic, Capital…..
60,000
Total assets…………..
$80,000
Total liabilities and
equity……………..
$80,000
MAGIC VIDEO GAMES
Balance Sheet
September 11
Assets
Liabilities
Cash…………………….
$42,000
Accounts payable….
$ 2,000
Office supplies…………
2,000
Notes payable…….
18,000
Land…………………….
10,000
Equity
Building…………………
20,000
I. Magic, Capital…..
60,000
Office furniture…………
6,000
Total assets…………..
$80,000
Total liabilities and
equity……………..
$80,000
MAGIC VIDEO GAMES
Balance Sheet
September 15
Assets
Liabilities
Cash…………………….
$32,000
Accounts payable….
$ 2,000
Office supplies…………
2,000
Notes payable…….
18,000
Land…………………….
10,000
Equity
Building…………………
20,000
I. Magic, Capital…..
60,000
Office furniture…………
6,000
Total liabilities and
equity……………..
$70,000
Total assets…………..
$70,000
Required: Describe the nature of each of these five transactions for the month of September.
Sept
1
5
9
11
15
1
I. Magic invested $60,000 cash in the company.
9
Office supplies were purchased for $2,000 on account.
11
Office furniture was purchased for $6,000 cash.
212. Identify the risk and the return in each of the following examples.
a. Investing $500 in a CD at 4.5% interest.
b. Placing a $100 bet on an NBA game.
c. Investing $10,000 in Microsoft stock.
d. Borrowing $20,000 in student loans.
213. Prepare a November 30 balance sheet in proper form for Green Bay Delivery Service
from the following alphabetical list of the accounts at November 30:
Accounts receivable…………………..
$10,000
Accounts payable…………………………..
18,000
Building……………………………………….
28,000
Cash………………………….……………….
8,000
Notes payable……………………………….
45,000
Office equipment……………………………..
12,000
R. Perkins, Capital…………………………..
?
Trucks………………………………………..
55,000
Cash……………………..
$ 18,000
Office equipment……….
Building………………….
Trucks…………………..
Total assets…………….
$113,000
equity…………………….
$113,000
214. Prepare a December 31 balance sheet in proper form for Surety Insurance using the
following accounts and amounts:
Commissions earned………….
$40,000
Accounts payable………………
3,500
Accounts receivable……………
5,000
M. Bruno, Capital………………
103,500
Office equipment……………….
10,000
Advertising expense………….
3,200
Cash……………………………..
7,500
Land………………………………..
35,000
Note payable……………………..
50,000
Office supplies……………………
500
Salaries expense………………..
12,000
Salaries payable…………………
1,000
Building………………………….
100,000
215. From the information given below, prepare a November income statement, a November
statement of owner’s equity, and a November 30 balance sheet. On November 1 of the current
year, Lois Bell began Lois Bell, Interior Design with an initial investment of $50,000 cash.
On November 30, her records showed the following (alphabetically arranged) items and
amounts.
Accounts payable…………….
$12,000
Office furnishings………..
$40,000
Accounts receivable……….
23,000
Owner’s withdrawals…….
6,000
Cash………………………
17,200
Rent expense……………
3,600
Fees earned……………….
30,000
Salaries expense……….
6,200
Notes payable…………………
4,250
Telephone expense…….
250
Revenue:
Fees earned………………………..
Operating expenses:
Salaries expense…………………………
6,200
Telephone expense………………………
Net income……………………………………..
Lois Bell, Capital, November 1………………………..
Net income……………………………….
69,950
69,950
Less withdrawals by owner…………………….
Lois Bell, Capital, November 30……………….
$63,950
1-89
216. Data for Madison Realty are as follows:
Total assets at January 1 …………………..
$100,000
Total liabilities at January 1 ……………..
35,000
Total revenues for the year ……………….
79,000
Total expenses for the year ………………
47,000
The owner, Mary Madison, withdrew a total of $30,000 for personal use during the year.
Using the above data, prepare Madison Realty’s Statement of Owner’s Equity for the year
ended December 31.
1-90
217. FastForward has the following beginning cash balance and cash transactions for the
month of January. Using this information prepare a statement of cash flows.
a.
Beginning cash balance……………..
$ 3,200
b.
Cash investment by owner…………..
15,000
c.
Cash payment toward long-term loan
1,000
d.
Cash payment of rent………………..
1,800
e.
Purchased equipment for cash……..
7,500
f.
Purchased store supplies for cash…
1,500
g.
Cash collected from customers…….
7,750
h.
Cash withdrawal by owner…………..
2,000
i.
Cash payment of wages…………….
4,000
218. The records of Skymaster Airplane Rentals show the following information as of
December 31. Skymaster withdrew $52,000 during the year for personal expenses. Prepare a
December income statement, a December statement of owner’s equity, and a December 30
balance sheet.
Accounts payable ………………………
$36,000
Wages expense …………………………
$75,000
Insurance expense ……………………..
2,000
Advertising expense ………………….
22,000
Accounts receivable …………………..
24,000
Cash ………………………………………..
11,000
H. Skymaster, capital,
January 1 ………………………………..
150,000
Office Furniture ………………………..
15,000
Airplanes ………………………………….
150,000
Maintenance expense…………………
39,000
Notes payable……………………………
47,000
Revenues …………………………………
217,000
Hangar …………………………………….
60,000
Revenues
Expenses:
Insurance expense
Wages expense
Advertising expense
Maintenance expense
Net income
Cash …………………………….
Accounts payable ………….
Accounts receivable ……….
Notes payable ……………….
Airplanes ………………………
Total liabilities
Hangar …………………………
Office furniture ……………..
H. Skymaster, Capital …….
Total assets …………………..
equity …………………………