Problem 1-8A (Concluded)
Part 3
Biz Consulting’s net income = $6,800 – $2,300 = $4,500
Problem 1-9A (60 minutes) Parts 1 and 2
Assets = Liabilities + Equity
Date Cash + Accounts
Receivable +Office
Supplies +Office
Equipment +Electrical
Equipment =Accounts
Payable +Common
Stock –Dividends+ Revenues –Expenses
Dec. 1 +$65,000 = + $65,000
2– 1,000 –$1,000
Bal. 64,000 = 65,000 –1,000
3– 4,800 + $13,000 + $8,200
Bal. 59,200 + 13,000 = 8,200 + 65,000 –1,000
5– 800 + $ 800
Bal. 58,400 + 800 + 13,000 = 8,200 + 65,000 –1,000
6 + 1,200 + $1,200
Bal. 59,600 + 800 + 13,000 = 8,200 + 65,000 + 1,200 –1,000
8 + $2,530 + 2,530
Bal. 59,600 + 800 + 2,530 + 13,000 = 10,730 + 65,000 + 1,200 –1,000
Problem 1-9A (Continued)
Part 3
Sony Electric
Income Statement
For Month Ended December 31
Revenues
Electrical fees earned…..……........... $7,100
Expenses
Rent expense………………….….…….… $1,000
Salaries expense……..….…….…….…. 1,400
Sony Electric
Statement of Retained Earnings
For Month Ended December 31
Retained earnings, December 1……………. $ 0
Add: Net income……………..………………… 4,160
Sony Electric
Balance Sheet
December 31
Assets Liabilities
Cash…………..…….…….….. $59,180 Accounts payable……………….. $ 8,550
Accounts receivable....... 900
Office supplies…..…........ 1,150 Equity
Problem 1-9A (Concluded)
Part 3—continued
Sony Electric
Statement of Cash Flows
For Month Ended December 31
Cash flows from operating activities
Cash received from customers1……………………..…….. $ 6,200
Cash paid for rent………………..………………………………. (1,000)
Net cash provided by operating activities….….…...... $ 2,460
Cash flows from investing activities
Purchase of office equipment………………………….…… (2,530)
Cash flows from financing activities
Investments from stockholders…………….….….…….… 65,000
Cash dividends…………….………………………………….….. (950)
Net cash provided by financing activities................. 64,050
Part 4
If the December 1 investment had been $49,000 cash instead of $65,000 and
the $16,000 difference was borrowed by the company from a bank, then:
(a) total owner investments during this period, as well as the ending equity,
would be $16,000 lower,
Problem 1-10A (15 minutes)
1. Return on assets is net income divided by the average total assets.
2. Return on assets seems satisfactory for the risk involved in the
3. We know that revenues less expenses equal net income. Taking the
$475,000 – Expenses = $65,000 Expenses must equal $410,000.
4. We know from the accounting equation that total financing (liabilities
plus equity) must equal the total for assets (investing). Since average
Problem 1-11A (20 minutes)
1. Return on assets equals net income divided by average total assets.
2. Strictly on the amount of sales to consumers, Coca-Cola’s sales of
$46,542 are less than PepsiCo’s $66,504.
3. Success in returning net income from the average amount invested is
4. The reported figures suggest that Coca-Cola yields a marginally higher
return on assets than PepsiCo. Based on this information alone, we
would be better advised to invest in Coca-Cola than PepsiCo.
Problem 1-12AA (20 minutes)
Case 1 Return: 5% interest or $100/year.
Case 2 Return: Expected winnings from your bet.
the “spread.”
Case 3 Return: Expected return on your stock investment (both
dividends and stock price changes).
Case 4 Return: Expected increase in career earnings and other
rewards from an accounting degree (less all costs).
Problem 1-13AB (15 minutes)
1. F 5. I
Problem 1-14AB (15 minutes)
An organization pursues three major business activities: financing,
investing, and operating.
(1) Financing is the means used to pay for resources.
PROBLEM SET B
Problem 1-1B (25 minutes)
Balance Sheet
Income
Statement
Statement of
Cash Flows
Transaction
Total
Assets
Total
Liab.
Total
Equity
Net
Income
Operating
Activities
Investing
Activities
Financing
Activities
1 Owner invests
cash for its stock + + +
2 Buys building by
signing note
payable
+ +
3 Buys store equip-
ment for cash +/– –
4 Provides ser-
vices for cash + + + +
10 Collects cash on
receivable from (9) +/– +
Problem 1-2B (40 minutes)
Part 1
Company V
(a) and (b)
Calculation of equity: 12/31/2014 12/31/2015
Assets………..………………. $54,000 $59,000
Equity…..….…….……........ $29,000 $23,000
(c) Calculation of net income for 2015:
Equity, December 31, 2014…..…….…….….. $29,000
Plus stock issuances……………………….….. 5,000
Plus net income………………………………..…. ?
Part 2
Company W
(a) Calculation of equity at December 31, 2014:
Assets………………..……………………………….. $80,000
(b) Calculation of equity at December 31, 2015:
Equity, December 31, 2014…..…….…….….. $20,000
Plus stock issuances……………………….….. 20,000
Equity, December 31, 2015…..…….…….….. $78 ,000
(c) Calculation of the amount of liabilities at December 31, 2015:
Assets………………..……………………………….. $100,000
Liabilities……………………………………..….….. $ 22 ,000