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244) Cornelia’s Closet has the following assets and liabilities for the dates given:
October 1 October 31
Cash………………………………………………. $40,000 60,000
Accounts Receivable ……………………….. 40,000 38,000
Accounts Payable ……………………………. 6,000 ?
Also, its net income, for October 1 through October 31 was $20,000 and there were no stock
issuances or dividends. Determine the equity at both October 1 and October 31.
245) If the liabilities of a company increased $92,000 during a period of time and equity in the
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business decreased $30,000 during the same period, did the assets of the company increase or
decrease? By what amount?
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246) Soo Lin, the sole stockholder, began an Internet Consulting practice and completed these
transactions during April of the current year:
April
1
Invested $100,000 of her personal savings into a checking account
opened in the name of the business in exchange for common stock.
2
Rented office space and paid $1,200 cash for the month of
September.
3
Purchased office equipment for $30,000, paying $8,000 cash and
agreeing to pay the balance in one year.
4
Purchased office supplies for $750 cash.
8
Completed work for a client and immediately collected $2,700
cash for the services.
15
Completed $3,600 services for a client on credit.
20
Received $3,600 from a client for the work completed on
September 15.
30
Paid the office secretary’s monthly salary, $3,000 cash.
30
The company paid $2,000 in cash dividends to Lin.
Show the effects of the above transactions on the accounting equation of Soo Lin, Consultant.
Use the following format for your answers. The first item is shown as an example.
Increase = I Decrease = D No effect = N
Date
Assets
Liabilities
Equity
Example:
April 1
I
N
I
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247) 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. Chester invested $100,000 in a corporation in exchange
for common stock.
+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.
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248) The following schedule reflects shows the first month’s transactions of the Green
Construction Company, owned by Jennifer Green, its sole stockholder:
Accounts
Accounts
Stockholder’s
Cash
+
Receivable
+
Supplies
+
Equipment
=
Payable
+
Equity
1.
+20,000
+20,000
2.
—5,000
+5,000
3.
+$1,500
+1,500
4.
+3,000
+3,000
5.
+1,000
+1,500
+2,500
6.
—750
—750
7.
+500
—500
8.
—400
—400
9.
—2,000
—2,000
Provide descriptions for each transaction.
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249) The accountant of Action Adventure Games prepared a balance sheet after every 10-day
period. The only resources invested by the stockholder were at the start of the company on June
1. During June, the first month of operation, the following balance sheets were prepared:
ACTION ADVENTURE GAMES
Balance Sheet
June 10
Assets
Equity
Cash……………………..
$60,000
Common stock……………..
$60,000
Total assets………………
$60,000
Total liabilities and equity…
$60,000
ACTION ADVENTURE GAMES
Balance Sheet
June 20
Assets
Liabilities
Cash…………………….
$48,000
Notes payable…….
$18,000
Land…………………….
10,000
Equity
Building…………………
20,000
Common stock…..
60,000
Total assets…………..
$78,000
Total liabilities and equity
$78,000
ACTION ADVENTURE GAMES
Balance Sheet
June 30
Assets
Liabilities
Cash…………………….
$51,000
Accounts payable….
$2,000
Office supplies…………
2,000
Notes payable…….
18,000
Land…………………….
10,000
Equity
Building…………………
20,000
Common stock…..
60,000
Retained earnings
3,000
Total assets…………..
$83,000
Total liabilities and equity
$83,000
Required: Describe the nature of each of the four transactions that took place between the
balance sheet dates shown. Assume only one transaction affected each account.
June
10
20
30
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250) Identify the risk and the return in each of the following examples.
a. Investing $500 in a certificate of deposit 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.
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251) Prepare a April 30 balance sheet in proper form for Two Rivers Vending Service from the
following alphabetical list of the accounts at April 30:
Accounts receivable……………………….
$10,000
Accounts payable…………………………..
18,000
Building……………………………………….
28,000
Cash………………………….……………….
10,000
Common Stock……………………………..
20,000
Notes payable……………………………….
47,000
Office equipment……………………………..
12,000
Retained earnings…………………………….
?
Trucks………………………………………..
55,000
Assets
Liabilities
Cash……………………..
$ 10,000
Accounts payable………
$ 18,000
Accounts receivable……
10,000
Notes payable…………..
47,000
Office equipment……….
12,000
Total liabilities…………
$ 63,000
Building………………….
28,000
Trucks…………………..
55,000
Equity
Common Stock……..
20,000
Retained Earnings……..
32,000
Total assets…………….
$115,000
Total liabilities and equity
$115,000
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252) Prepare a December 31 balance sheet in proper form for Smokey River Supplies from the
following list of the accounts:
Cash………………………….……………………
$10,000
Accounts receivable……………………………..
8,000
Supplies………………………………………….
12,000
Equipment……………………………………..
35,000
Land………………………………………………..
18,000
Accounts payable……………………………..
13,000
Notes payable……………………………….….
41,000
Common stock………………………….…..
20,000
Retained earnings………………………….…..
9,000
Assets
Liabilities
Cash……………………..
Accounts payable………
Accounts receivable……
Supplies………………….
Equipment……………….
Land……………………..
Common stock ……..
Retained earnings……..
Total assets…………….
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253) Prepare a December 31 balance sheet in proper form for Cane Property Management using
the following accounts and amounts:
Commissions earned………………
$40,000
Accounts payable………………
3,500
Accounts receivable……………
5,000
Common stock ………………
60,000
Retained earnings………………
44,500
Office equipment……………….
10,000
Advertising expense…………. …
3,200
Cash…………………………….
7,500
Land………………………………………..
35,000
Note payable……………………………
50,000
Office supplies…………………………
1,500
Salaries expense………………………
12,000
Salaries payable………………………
1,000
Building…………………………………..
100,000
Assets
Liabilities
Accounts receivable……
Office supplies………….
Office equipment……….
Total assets…………….
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254) From the information given below, prepare a November income statement, a November
statement of retained earnings, and a November 30 balance sheet. On November 1 of the current
year, Victoria Garza, the sole stockholder, began Garza Décor 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
Notes payable………………
4,250
Accounts receivable……….
19,000
Office furnishings………..
$40,000
Cash………………………
21,200
Rent expense……………
9,600
Dividends……………….
6,000
Salaries expense……….
4,200
Fees earned……………….
34,000
Telephone expense…….
250
Revenue:
Fees earned………………………..
Operating expenses:
Rent expense…………………………….
Salaries expense…………………………
4,200
Telephone expense………………………
Net income……………………………………..
Retained earnings, November 1………………………..
$ 0
Plus: Net income…………………………….
19,950
19,950
Less dividends…………………….
(6,000)
Retained earnings, November 30……………….
$13,950
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