Chapter 01 – Accounting in Business
.Exercise 1-13 (30 minutes)
Assets =Liabilities +Equity
Cash +Accounts
Receivable +Equip-
ment =Accounts
Payable +M.Chen,
Capital –
M.Chen,
With-
drawals +Revenues –Expenses
a. +$60,000 + $15,000 = + $75,000
b. – 1,500 ______ ______ – $1,500
Bal. 58,500 + + 15,000 = + 75,000 – 1,500
c. _______ + 10,000 +$10,000 ______ _____
Bal. 58,500 + + 25,000 = 10,000 + 75,000 – 1,500
Exercise 1-14 (10 minutes)
Return on assets = Net income / Average total assets
1-1
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Chapter 01 – Accounting in Business
Interpretation: Swiss Group’s return on assets of 16% is markedly above
the 10% return of its competitors. Accordingly, its performance is
assessed as superior to its competitors.
Exercise 1-15 (15 minutes)
ERNST CONSULTING
Income Statement
For Month Ended October 31
Revenues
Consulting fees earned..................... $14,000
Expenses
Salaries expense..………………............ $7,000
Exercise 1-16 (15 minutes)
ERNST CONSULTING
Statement of Owner’s Equity
For Month Ended October 31
E. Ernst, Capital, October 1............................ $ 0
Add: Owner’s investment………..……......... 84,000
Exercise 1-17 (15 minutes)
ERNST CONSULTING
Balance Sheet
October 31
Assets Liabilities
1-2
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Chapter 01 – Accounting in Business
* For the computation of this amount see Exercise 1-16.
Exercise 1-18 (15 minutes)
ERNST CONSULTING
Statement of Cash Flows
For Month Ended October 31
Cash flows from operating activities
Cash received from customers..………..………….................. $ 0
Cash paid to employees1……………………………....……………. (1,750)
Cash paid for rent..………………..………….............................. (3,550)
1$7,000 Salaries Expense – $5,250 still owed = $1,750 paid to employees.
Exercise 1-19 (10 minutes)
I 1. Cash purchase of equipment O 5. Cash paid on an account payable
1-3
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Chapter 01 – Accounting in Business
Exercise 1-20 (20 minutes)
BMW GROUP
Income Statement
For Year Ended December 31, 2013
(Euros in millions)
Revenues ………………………………………………………….. € 68,821
Expenses
Cost of sales……………………………………………….…. €54,276
Exercise 1-21B (10 minutes)
a. Financing*
* Would also be listed as “investing” if resources contributed by owner were in the
form of nonfinancial resources.
PROBLEM SET A
Problem 1-1A (25 minutes)
Balance Sheet
Income
Statement
Statement of
Cash Flows
Transaction
Total
Assets
Total
Liab.
Total
Equity
Net
Income
Operating
Activities
Financing
Activities
Investing
Activities
1 Owner invests
cash in business + + +
1-4
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Chapter 01 – Accounting in Business
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Chapter 01 – Accounting in Business
Problem 1-2A (40 minutes)
Part 1
Company A
(a) Equity on December 31, 2014:
Assets…...………………..……........................ $55,000
(b) Equity on December 31, 2015:
Equity, December 31, 2014..…………..…….. $30,500
(c) Liabilities on December 31, 2015:
Part 2
Company B
(a) and (b)
Equity: 12/31/2014 12/31/2015
Assets….…..…………............. $34,000 $40,000
(c) Net income for 2015:
Equity, December 31, 2014..…………….... $12,500
Plus investment by owner..................... 1,400
Plus net income…………………………..…… ?
1-6
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Chapter 01 – Accounting in Business
Problem 1-2A (Continued)
Part 3
Company C
First, calculate the beginning balance of equity:
Dec. 31, 2014
Next, find the ending balance of equity by completing this table:
Equity, December 31, 2014..…………..…….. $15,000
Finally, find the ending amount of assets by adding the ending balance of
equity to the ending balance of liabilities:
Dec. 31, 2015
Part 4
Company D
First, calculate the beginning and ending equity balances:
12/31/2014 12/31/2015
Then, find the amount of investment by owner during 2015:
Equity, December 31, 2014..…….................. $20,000
Plus investment by owner..…………….......... ?
1-7
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Chapter 01 – Accounting in Business
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Chapter 01 – Accounting in Business
Problem 1-2A (Concluded)
Part 5
Company E
First, compute the balance of equity as of December 31, 2015:
Assets…...………………..……........................ $113,000
Next, find the beginning balance of equity as follows:
Equity, December 31, 2014..…………..…….. $ ?
Plus investment by owner........................ 6,500
Finally, find the beginning amount of liabilities by subtracting the beginning
balance of equity from the beginning balance of assets:
Dec. 31, 2014
Problem 1-3A (15 minutes)
Armani Company
Balance Sheet
December 31, 2015
Assets……………………….. $90,000 Liabilities…………………………… $44,000
Problem 1-4A (15 minutes)
Edison Energy Company
Income Statement
For Year Ended December 31, 2015
1-9
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Chapter 01 – Accounting in Business
Revenues ……………………………………..…. $55,000
Problem 1-5A (15 minutes)
Kojo Company
Statement of Owner’s Equity
For Year Ended December 31, 2015
K. Kojo, Capital, Dec. 31, 2014 ....................... $ 7,000
Add: Net income………………………………………. 8 ,000
Problem 1-6A (15 minutes)
Kia Company
Statement of Cash Flows
For Year Ended December 31, 2015
Cash from operating activities ....................... $ 6,000
Cash used by investing activities................... (2,000)
1-10
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Chapter 01 – Accounting in Business
Problem 1-7A (60 minutes) Parts 1 and 2
Assets = Liabilities + Equity
Date Cash + Accounts
Receivable
+Office
Equipment
=Accounts
Payable
+G. Gram,
Capital –G. Gram,
With-drawal
s
+ Revenues –Expenses
May 1 +$40,000 = + $40,000
1– 2,200 =–$2,200
3 + $1,890 = + $1,890
5– 750 ` = –750
8 + 5,400 = + $5,400
1-11
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Chapter 01 – Accounting in Business
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