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129. List the five steps in the process by which accounting provides information to users.
130. What is the major difference between the objective of financial accounting and the objective of managerial
accounting?
131. Give the major disadvantage of disregarding the cost concept and constantly revaluing assets based on
appraisals and opinions.
132. On May 7, Carpet Barn Company offered to pay $83,000 for land that had a selling price of $105,000. On
May 15, Carpet Barn accepted a counteroffer of $95,000. On June 5, the land was assessed at a value of
$115,000 for property tax purposes. On December 10, Carpet Barn Company was offered $135,000 for the
land by another company. At what value should the land be recorded in Carpet Barn Company’s records?
133. Donner Company is selling a piece of land adjacent to their business. An appraisal reported the market
value of the land to be $120,000. The Focus Company initially offered to buy the land for $107,000. The
companies settled on a purchase price of $115,000. On the same day, another piece of land on the same block
was sold for $122,000. Under the cost concept, what is the amount that will be used to record this transaction
in the accounting records?
134. Explain the meaning of the business entity concept.
135. Darnell Company purchased $88,000 of computer equipment from Joseph Company. Darnell Company
paid for the equipment using cash that had been obtained from the sale of capital stock to Donnie Darnell.
Which entity or entities (Darnell Company, Joseph Company, Donnie Darnell) should record the transaction
involving the computer equipment on their accounting records?
136. Explain the meaning of:
(a) the objectivity concept
(b) the unit of measure concept
137. At the end of its accounting period, December 31, 2010, Miller’s Arcade has assets of $450,000 and
liabilities of $125,000. Using the accounting equation, determine the following amounts:
(a)
Stockholders’ equity as of December 31, 2010.
(b)
Stockholders’ equity as of December 31, 2011, assuming that assets increased by $65,000 and liabilities increased by $35,000
during 2011.
138. Determine the missing amount “X” for each of the following:
Assets
Liabilities
Stockholders’ Equity
a. $78,500
$37,600
X
b. X
$53,280
$145,000
c. $49,500
X
$34,000
139. Krammer Company has liabilities equal to one fourth of the total assets. Krammer’s stockholders’ equity
is $45,000. Using the accounting equation, what is the amount of liabilities for Krammer?
140. The following selected transactions were completed by Daniels Company during May:
1.
Capital stock was issued for $55,000.
2.
Paid creditors on account, $7,000.
3.
Billed customers for services on account, $2,565.
4.
Received cash from customers on account, $8,450.
5.
Paid cash dividends, $2,500.
6.
Received the utility bill, $160, to be paid next month.
Indicate the effect of each
transaction on the accounting
equation:
1)
By Account type - (A)assets, (L)liabilities, (SE)Stockholders’ Equity, (R)revenue, and (E)expense
2)
Name of account for the entry
3)
The amount of the transaction
4)
Whether it is an increase or decrease to the account
Note: Each transaction has two entries.
Entry
Entry
Acct. Type
(1)
Name of Acct.
(2)
Amount
(3)
Increase or
Decrease
(4)
Acct.
Type
(1)
Name of Acct.
(2)
Amount
(3)
Increase or
Decrease
(4)
1.
2.
3.
4.
5.
6.
141. Use the accounting equation to answer each of the independent questions below.
a. At the beginning of the year, Norton Company assets were $75,000 and its stockholders’ equity was
$38,000. During the year, assets increased by $18,000 and liabilities increased by $4,000. What was the
stockholders’ equity at the end of the year?
b. At the beginning of the year, Turpin Industries had liabilities of $44,000 and stockholders’ equity of
$66,000. If assets increased by $10,000 and liabilities decreased by $5,000, what was the stockholders’ equity
at the end of the year?
142. Collins Landscape Company purchased various landscaping supplies on account to be used for landscape
designs for its customers. How will this business transaction affect the accounting equation?
143. Bob Johnson is the sole stockholder of Johnson’s Carpet Cleaning Service. Bob purchased a personal
automobile for $10,000 cash plus he took loan for $20,000 in his name. Describe how this transaction is related
to the business entity concept.
144. Shiny Kar Company had the following transactions. For each transaction, show the effect on the
accounting equation by putting the amount and direction (plus, minus, or NC for no change) in each box of the
table below.
Assets
Liabilities
Stockholders’ Equity
a. Shiny Kar paid $5,000 in cash dividends to stockholders.
b. Shiny Kar Company sold 2 cars for a total of $55,000 on account.
c. The cost of the cars sold in (b) above was $40,000.
d. Shiny Kar received $35,000 payment for a car previously sold on account.
e. Shiny Kar paid $450 for advertising.
f. Shiny Kar purchased $150 of cleaning supplies on account.
145. Ramierez Company received its first electric bill in the amount of $60 which will be paid next
month. How will this transaction affect the accounting equation?
146. At December 31, 2011, Martin Consultants has assets of $430,000 and liabilities of $205,000. Using the
accounting equation and considering each case independently, determine the following:
a. Total Stockholders’ Equity as of December 31, 2011.
b. Total Stockholders’ Equity as of December 31, 2012, assuming that assets increased by $12,000 and
liabilities increased by $15,000 in 2012.
c. Total Stockholders’ Equity as of December 31, 2012, assuming that assets decreased by $8,000 and liabilities
increased by $14,000 during 2012.
147. Simpson Auto Body Repair purchased $20,000 of machinery. The company paid $8,000 in cash at the
time of the purchase and signed a promissory note for the remainder to be paid in four monthly installments.
(a) How will the purchase affect the accounting equation?
(b) How will the payment of the first monthly installment affect the accounting equation?
148. On July 1 of the current year, the assets and liabilities of Wong Company are as follows: Cash, $27,000;
Accounts Receivable, $12,300; Supplies, $3,100; Land, $35,000; Accounts Payable, $13,900. What is the
amount of stockholders’ equity as of July 1 of the current year?
149. Indicate how the following transactions affect the accounting equation:
(a) The purchase of supplies on account.
(b) The purchase of supplies for cash.
(c) Cash dividends paid to stockholders.
(d) Revenues received in cash.
(e) Revenues received on account.
150. Discuss the characteristics of a LLC (Limited liability company).
151. At the end of its accounting period, December 31, 2011, Hsu’s Financial Services has assets of $575,000
and stockholders’ equity of $335,000. Using the accounting equation and considering each case independently,
determine the following amounts.
a. Hsu’s liabilities as of December 31, 2011.
b. Hsu’s liabilities as of December 31, 2012, assuming that assets increased by $56,000 and stockholders’
equity decreased by $32,000.
c. Net income or net loss during 2012, assuming that as of December 31, 2012, assets were $592,000,
liabilities were $450,000, and there were no additional capital stock sales or dividends paid in 2012.
152. a. A vacant lot acquired for $83,000 cash is sold for $127,000 in cash. What is the effect of the sale on
the total amount of the seller’s (1) assets, (2) liabilities, and (3) stockholders’ equity?
b. Assume that the seller owes $52,000 on a loan for the land. After receiving the $127,000 cash in (a), the
seller pays the $52,000 owed. What is the effect of the payment on the total amount of the seller’s (1) assets,
(2) liabilities, and (3) stockholders’ equity?
153. Indicate whether each of the following represents an asset, liability, or stockholder’s equity item.
(a)
accounts payable
(b)
wages expense
(c)
capital stock
(d)
accounts receivable
(e)
dividends
(f)
land
154. The Austin Land Company sold land for $85,000 in cash. The land was originally purchased for
$65,000. At the time of the sale, $40,000 was still owed to Regions Bank. After the sale, The Austin Land
Company paid off the loan. Explain the effect of the sale and the payoff of the loan on the accounting equation.
155. Given the following: Beginning retained earnings $ 58,000
Ending retained earnings $ 30,000
Dividends declared and paid $ 25,000
Calculate net income or net loss.
156. The accountant for Franklin Company prepared the following list of account balances from the company’s
records for the year ended December 31, 2011:
Fees Earned
$165,000
Cash
$ 30,000
Accounts Receivable
14,000
Selling Expenses
44,000
Equipment
64,000
Capital Stock
7,000
Accounts Payable
22,000
Retained Earnings
23,000
Salaries & Wages Expense
40,000
Prepaid Rent
2,000
Dividends
5,000
Income Taxes Expense
13,000
Salaries & Wages Payable
15,000
Rent Expense
20,000
Determine the total assets at the end of 2011 for Franklin Company.
157. The accountant for Franklin Company prepared the following list of account balances from the company’s
records for the year ended December 31, 2011:
Fees Earned
$165,000
Cash
$ 30,000
Accounts Receivable
14,000
Selling Expenses
44,000
Equipment
64,000
Capital Stock
7,000
Accounts Payable
22,000
Retained Earnings
23,000
Salaries & Wages Expense
40,000
Prepaid Rent
2,000
Dividends
5,000
Income Taxes Expense
13,000
Salaries & Wages Payable
15,000
Rent Expense
20,000
Determine the total liabilities at the end of 2011 for Franklin Company.
158. The accountant for Franklin Company prepared the following list of account balances from the company’s
records for the year ended December 31, 2011:
Fees Earned
$165,000
Cash
$ 30,000
Accounts Receivable
14,000
Selling Expenses
44,000
Equipment
64,000
Capital Stock
7,000
Accounts Payable
22,000
Retained Earnings
23,000
Salaries & Wages Expense
40,000
Prepaid Rent
2,000
Dividends
5,000
Income Taxes Expense
13,000
Salaries & Wages Payable
15,000
Rent Expense
20,000
Based on this information, is Franklin Company profitable? Explain your answer by including net income or loss.
159. Amos Moving Services’ account balances at March 31, 2014, the end of the current year, are listed
below. The Retained Earnings balance was $180,000 at April 1, 2013, the beginning of the current year.
Accounts Payable
$ 2,000
Miscellaneous Expense
$1,030
Accounts Receivable
10,340
Office Expense
1,240
Cash
21,420
Supplies
1,670
Fees Earned
73,450
Wages Expense
23,550
Land
47,000
Dividends
16,570
Building
157,630
Capital Stock
25,000
Based on the data provided for Amos Moving Services, prepare an income statement for the current year ended March 31, 2014.
160. Amos Moving Services’ account balances at March 31, 2014, the end of the current year, are listed
below. The Retained Earnings balance was $180,000 at April 1, 2013, the beginning of the current year.
Accounts Payable
$ 2,000
Miscellaneous Expense
$1,030
Accounts Receivable
10,340
Office Expense
1,240
Cash
21,420
Supplies
1,670
Fees Earned
73,450
Wages Expense
23,550
Land
47,000
Dividends
16,570
Building
157,630
Capital Stock
25,000
Based on the data provided for Amos Moving Services, prepare a retained earnings statement for the year ended March 31, 2014.
161. Amos Moving Services’ account balances at March 31, 2014, the end of the current year, are listed
below. The Retained Earnings balance was $180,000 at April 1, 2013, the beginning of the current year.
Accounts Payable
$ 2,000
Miscellaneous Expense
$1,030
Accounts Receivable
10,340
Office Expense
1,240
Cash
21,420
Supplies
1,670
Fees Earned
73,450
Wages Expense
23,550
Land
47,000
Dividends
16,570
Building
157,630
Capital Stock
25,000
Based on the data provided for Amos Moving Services, prepare a balance sheet for the current year ended March 31, 2014.
162. A summary of cash flows for Alex Design Services for the year ended December 31, 2012, is shown
below.
Cash receipts:
Cash received from customers
$83,990
Cash received from additional sale of capital stock
25,000
Cash payments:
Cash paid for expenses
$27,000
Cash paid for land
47,000
Cash paid for supplies
410
Dividends
5,000
The cash balance as of January 1, 2012
$40,600
Prepare a statement of cash flows for Alex Design Services for the year ended December 31, 2012.
163. The total assets and the total liabilities of a business at the beginning and at the end of the year appear
below. During the year, the company paid $55,000 in cash dividends and issued an additional $33,000 of
capital stock.
Assets
Liabilities
Beginning of year
$305,000
$200,000
End of year
365,000
230,000
Calculate the net income for the year.
164. What information does the income statement give to business users?
165. What are the three sections of the statement of cash flows?
166. Match the following accounts to the financial statement where they can be found. (Hint: Some of the
accounts can be found in more than one financial statement.)
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Retained Earnings Statement
#
Account
1.
Dividends
2.
Revenues
3.
Supplies
4.
Land
5.
Accounts Payable
6.
Accounts Receivable
7.
Operating Activities
8.
Wages Expense
9.
Net Income
10.
Cash
167. Name and describe the four primary financial statements for a corporation.
168. There are four transactions that affect stockholders’ equity.
(a) What are the two types of transactions that increase stockholders’ equity?
(b) What are the two types of transactions that decrease stockholders’ equity?
169. A summary of cash flows for Lopez Wedding Planning for the year ended December 31, 2011 is shown
below.
Cash receipts:
Cash received from customers
$57,360
Cash received from bank loan
15,000
Cash payments:
Cash paid for operating expenses
$12,120
Cash paid for equipment
18,070
Cash paid for party supplies
9,480
Dividends
12,000
The cash balance as of January 1, 2011
$15,580
Prepare a statement of cash flows for Lopez Wedding Planning for the year ended December 31, 2011.
170. Explain the interrelationship between the balance sheet and the statement of cash flows.
171. The following data were taken from Harrison Company’s balance sheet:
Dec. 31, 2012 Dec. 31, 2011
Total liabilities $150,000 $105,000
Total stockholders’ equity 75,000 60,000
a. Compute the ratio of liabilities to stockholders’ equity.
b. Has the creditors’ risk increased or decreased from December 31, 2011, to December 31, 2012?
172. Company G has a ratio of liabilities to stockholders’ equity of 0.12 and 0.28 for 2010 and 2011,
respectively. In contrast, Company M has a ratio of liabilities to stockholders’ equity of 1.13 and 1.29 for the
same period.
REQUIRED:
Based on this information, which company's creditors are more at risk and why? Should the creditors of either
company fear the risk of nonpayment?
173. Given the following data:
Dec. 31,2014 Dec. 31,2013
Total liabilities $128,250 $120,000
Total stockholders’ equity 95,000 80,000
a. Compute the ratio of liabilities to stockholders’ equity for each year.
b. Has the creditors’ risk increased or decreased from December 31, 2013, to December 31, 2014?
174. The assets and liabilities of S&P Day Spa at December 31, 2014 and expenses for the year are listed
below. The retained earnings balance was $68,000 at January 1, 2014. Net income for 2014 is $45,625.
Accounts Payable
$4,375
Spa Operating Expense
$23,760
Accounts Receivable
$8,490
Office Expense
$2,470
Cash
$13,980
Spa Supplies
$9,230
Fees Earned
???
Wages Expense
$26,580
Spa Furniture & Equipment
$56,000
Dividends
$38,170
Computers
$2,130
Capital Stock
$10,000
Prepare an income statement for the current year ended December 31, 2014.
175. The assets and liabilities of S&P Day Spa at December 31, 2014 and expenses for the year are listed
below. The retained earnings balance was $68,000 at January 1, 2014.
Accounts Payable
$4,375
Spa Operating Expense
$23,760
Accounts Receivable
$8,490
Office Expense
$2,470
Cash
$13,980
Spa Supplies
$9,230
Fees Earned
$98,435
Wages Expense
$26,580
Spa Furniture & Equipment
$56,000
Dividends
$38,170
Computers
$2,130
Capital Stock
$10,000
Prepare a retained earnings statement for the current year ended December 31, 2014.
176. The assets and liabilities of S&P Day Spa at December 31, 2014 and expenses for the year are listed
below. The retained earnings balance was $68,000 at January 1, 2014.
Accounts Payable
$4,375
Spa Operating Expense
$23,760
Accounts Receivable
$8,490
Office Expense
$2,470
Cash
$13,980
Spa Supplies
$9,230
Fees Earned
$98,435
Wages Expense
$26,580
Spa Furniture & Equipment
$56,000
Dividends
$38,170
Computers
$2,130
Capital Stock
$10,000
Prepare a Balance Sheet at December 31, 2014.
177. For each of the following companies, identify whether it is a service, merchandising, or manufacturing
business.
