The Role of Accounting in Business ♦ 37
8. Classify the following as:
a.
Asset
b.
Liability
c.
Revenue
d.
Expense
(1)
Accounts payable
(2)
Office Equipment
(3)
Wages payable
(4)
Salary expense
(5)
Dividends payable
(6)
Art fees earned
(7)
Prepaid rent
(8)
Accounts receivable
(9)
Income tax expense
(10)
Office supplies
9. Match the following items with the appropriate financial statement:
a.
Income statement
b.
Balance sheet
c.
Statement of retained earnings
d.
Statement of cash flows.
(1)
Cash
(2)
Salary expense
(3)
Interest payable
(4)
Depreciation expense
(5)
Capital stock
(6)
Cash flows from operating activities
(7)
Accounts Receivable
(8)
Beginning balance of retained earnings
(9)
Notes payable
(10)
Accounts payable
(11)
Changes in current assets and current liabilities
(12)
Total expenses
(1)
b
(2)
a
(3)
b
(4)
d
(5)
b
(6)
c
(7)
a
(8)
a
(9)
d
(10)
a
38 ♦ Chapter 1
10. Given the following data, prepare in good form the (1) income statement, (2) statement of retained
earnings, and (3) balance sheet for Lou’s Laundry and Dry Cleaning Inc. for the month that just
ended, January 31, 2006. (This is Lou’s first month of business).
Account Titles
Debit
Credit
Cash
27,470
Accounts Receivable
2,000
Supplies
600
Equipment
16,200
Accounts Payable
400
Notes Payable
6,000
Wages Payable
340
Utilities Payable
250
Interest Payable
45
Income Taxes Payable
4,600
Common Stock
25,475
Dividends
2,140
Dry Cleaning Revenue
16,760
Laundry Revenue
7,315
Wages Expense
2,580
Rent Expense
1,000
Insurance Expense
600
Supplies Expense
2,400
Utilities Expense
750
Advertising Expense
800
Interest Expense
45
Income Tax Expense
4,600
61,185
61,185
(1)
b
(2)
a
(3)
b
(4)
a
(5)
b
(6)
d
(7)
b
(8)
c
(9)
b
(10)
b
(11)
d
(12)
a
The Role of Accounting in Business ♦ 39
40 ♦ Chapter 1
CASE
1. Indicate whether each of the following companies is primarily an (a) service, (b) merchandise, or
(c) manufacturing business.
(1)
Walmart
(2)
Bavarian Motor Works
(3)
H & R Block
(4)
Citibank
(5)
Best Buy
(6)
Banana Republic
(7)
UPS
(8)
AT&T
(9)
Daimler Chrysler
(10)
Sears
(1)
b
(2)
c
(3)
a
(4)
a
(5)
b
(6)
b
(7)
a
(8)
a
(9)
c
(10)
b
Cash
Accounts Receivable
Supplies
Equipment
Total Assets
Accounts Payable
Notes Payable
Wages Payable
Utilities Payable
Interest Payable
Income Taxes Payable
Total Liabilities
Common Stock
Retained Earnings
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
The Role of Accounting in Business ♦ 41
PepsiCo’s Financial Statements
Answer the following question(s) using these selected portions of PepsiCo’s financial statements.
42 ♦ Chapter 1
The Role of Accounting in Business ♦ 43
44 ♦ Chapter 1
The Role of Accounting in Business ♦ 45
46 ♦ Chapter 1
The Role of Accounting in Business ♦ 47
48 ♦ Chapter 1
The Role of Accounting in Business ♦ 49
2. Refer to PepsiCo’s Financial Statements. Based on the statements for PepsiCo, answer the
following questions:
(1)
How are PepsiCo’s numbers reported (in what denomination)?
(2)
What are PepsiCo’s sales for 2001?
(3)
What is PepsiCo’s cost of sales for 2001?
(4)
What is PepsiCo’s net income 2001?
(5)
What are PepsiCo’s sales for 2000?
(6)
What are PepsiCo’s sales for 1999?
(1)
In millions of dollars
(2)
$26,935,000,000
(3)
$10,754,000,000
(4)
$2,662,000,000
(5)
$25,479,000,000
(6)
$22,970,000,000
50 ♦ Chapter 1
3. Refer to PepsiCo’s Financial Statements. Review PepsiCo’s income statement analysis and answer
the following questions:
(1)
What is PepsiCo’s percent of cost of sales to sales for 2001?
(2)
What is the percentage of net income to sales for 2001?
(3)
What percentage did sales grow from 2000 to 2001?
(4)
What was the percentage change in net income from 2000 to 2001?
4. Refer to PepsiCo’s Financial Statements. Write out the basic accounting equation for 2001 and
2000.
2001
2002
(1)
10,754/26,935 = 39.93%
(2)
2,662/26,935 = 10% (Rounded)
(3)
(26,935 – 25,479)/25,479 = 5.7%
(4)
The Role of Accounting in Business ♦ 51
5. Prepare a horizontal analysis of PepsiCo’s net sales, costs and expenses and operating profit on the
Consolidated Statement of Income between 2000 and 2001.