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
Sony Electric
Statement of Owner’s Equity
For Month Ended December 31
S. Sony, Capital, December 1…………….…. $ 0
Add: Investment by owner..…….………… 65,000
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 paid for utilities……………………………………….….. (540)
Cash paid to employees…………………..……….……….… (1,400)
Net cash provided by operating activities.….……...... $ 2,460
Cash flows from investing activities
Purchase of office equipment………………….…………... (2,530)
Purchase of electrical equipment……………..………….. (4,800)
Net cash used by investing activities..………............. (7,330)
Cash flows from financing activities
Investments by owner………………………………………….. 65,000
1$1,200 + $5,000 = $6,200
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:
Problem 1-10A (15 minutes)
1. Return on assets is net income divided by the average total assets.
Kyzera’s return: $65,000 / $250,000 = 0.26 or 26%.
2. Return on assets seems satisfactory for the risk involved in the
4. We know from the accounting equation that total financing (liabilities
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.
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.
Risk: Very low; it is the risk of the financial institution not
paying interest and principal.
Case 4 Return: Expected increase in career earnings and other
rewards from an accounting degree (less all costs).
Risk: Depends on your ability to successfully learn and
apply accounting knowledge.
Problem 1-13AB (15 minutes)
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
Financing
Activities
Investing
Activities
1 Owner invests
cash in business + + +
2 Buys building by
signing note
payable
+ +
3 Buys store equip-
ment for cash +/– –
4 Provides ser-
vices for cash + + + +
5 Pays cash for
rent incurred – – – –
Problem 1-2B (40 minutes)
Part 1
Company V
(c) Calculation of net income for 2015:
Equity, December 31, 2014………….……….. $29,000
Plus investments by owner…….….………... 5,000
Plus net income…………………………………... ?
Part 2
Company W
(a) Calculation of equity at December 31, 2014:
Assets……………………………………………….… $80,000
Liabilities………………………………………….…. (60 ,000)
Equity…………………….…….………….…………. $20 ,000
(b) Calculation of equity at December 31, 2015:
Equity, December 31, 2014………….……….. $20,000
(c) Calculation of the amount of liabilities at December 31, 2015:
Assets……………………………………………….… $100,000
Equity…………………….…….………….…………. (78 ,000)
Liabilities………………………………………….…. $ 22 ,000
Problem 1-2B (Continued)
Part 3
Company X
First, calculate the beginning and ending equity balances:
12/31/2014 12/31/2015
Then, find the amount of investments by owner during 2015 as follows:
Equity, December 31, 2014………………………….. $ 73,000
Plus investments by owner.….……….………...... ?
Thus, the owner’s investments must have been $ 29 ,200
Part 4
Company Y
First, calculate the beginning balance of equity:
Dec. 31, 2014
Assets……………………………………………….… $92,500
Liabilities………………………………………….…. 51 ,500
Equity…………………….…….………….…………. $41 ,000
Next, find the ending balance of equity as follows:
Equity, December 31, 2015………….……….. $93 ,100
Finally, find the ending amount of assets by adding the ending balance of
Problem 1-2B (Concluded)
Part 5
Company Z
First, calculate the balance of equity as of December 31, 2015:
Assets……………………………………………….… $170,000
Liabilities………………………………………….…. (42 ,000)
Equity…………………….…….………….…………. $128 ,000
Next, find the beginning balance of equity as follows:
Thus, the beginning balance of equity is $44,000.
Finally, find the beginning amount of liabilities by subtracting the beginning
balance of equity from the beginning balance of assets:
Dec. 31, 2014
Problem 1-3B (15 minutes)
Safari Company
Balance Sheet
December 31, 2015
Assets…………………….… $114,000 Liabilities………………………….. $ 64,000
Equity………….…….………….…. 50,000
Total assets……..……….. $114,000 Total liabilities and equity.... $114,000
Problem 1-4B (15 minutes)
Solar Company
Income Statement
For Year Ended December 31, 2015
Revenues ……………………………..…….……. $68,000
Problem 1-5B (15 minutes)
Audi Company
Statement of Owner’s Equity
For Year Ended December 31, 2015
A. Audi, Capital, Dec. 31, 2014 ………………... $49,000
Add: Net income……………………..………….. 5 ,000
Problem 1-6B (15 minutes)
Banji Company
Statement of Cash Flows
For Year Ended December 31, 2015
Cash used by operating activities .…….…........... $(3,000)
Cash from investing activities………………………... 1,600
Cash, December 31, 2015………….………….……….. $ 1 ,700
Problem 1-7B (60 minutes) Parts 1 and 2
Assets = Liabilities + Equity
Date Cash +Accounts
Receivable +Equipment =Accounts
Payable +N. Niko,
Capital –N. Niko,
Withdrawals +Revenues –Expenses
June 1 +$130,000 = + $130,000
2– 6,000 =–$6,000
4 + $2,400 = + $2,400
24 + 675 = + 675
25 + 7,900 –7,900 =
26 – 2,400 =– 2,400
28 – 800 =–800
29 – 4,000 =–$4,000
30 – 150 =–150
30 – 890 =–890
$130,060 + $ 675 + $2,400 = $ 0 + $130,000 –$4,000 + $16,925 – $9,790
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