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Part 3
The Gram Co.
Income Statement
For Month Ended May 31
Revenues
Consulting services revenue ........... $11,100
Expenses
Rent expense..................................... $2,200
Salaries expense................................ 1,500
The Gram Co.
Statement of Owner’s Equity
For Month Ended May 31
G. Gram, Capital, May 1........................................... $ 0
Add: Investment by owner.................................... 40,000
The Gram Co.
Balance Sheet
May 31
Assets Liabilities
Cash..............................$42,780 Accounts payable....................... $ 80
Office equipment.......... 1,890 Equity
1-1
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Problem 1-7A (Concluded)
Part 3—continued
The Gram Co.
Statement of Cash Flows
For Month Ended May 31
Cash flows from operating activities
Cash received from customers................................ $11,100
Cash paid for rent..................................................... (2,200)
Cash paid for cleaning............................................. (750)
Cash flows from investing activities
Cash flows from financing activities
Investment by owner................................................ 40,000
Withdrawal by owner................................................ (1,400)
1-2
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Education.
Problem 1-8A (60 minutes) Parts 1 and 2
Assets = Liabilities + Equity
Cash + Accounts
Receivable +Office
Supplies +Office
Equipment +Building =Accounts
Payable +Notes
Payable +L. Lopez,
Capital -
L. Lopez,
With-draw
als
+Reve-nu
es -Expen-se
s
a. +$70,000 + $10,000 + $80,000
b. - 20,000 + $150,000 + $130,000
Bal. 50,000 + 10,000 + 150,000 = + 130,000 + 80,000
c. - 15,000 + 15,000
Bal. 35,000 + 25,000 + 150,000 = + 130,000 + 80,000
d. + $1,200 + 1,700 + $2,900
Bal. 35,000 + 1,200 + 26,700 + 150,000 = 2,900 + 130,000 + 80,000
e. - 500 -$ 500
1-3
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Problem 1-8A (Concluded)
Part 3
1-4
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Problem 1-9A (60 minutes) Parts 1 and 2
Assets = Liabilities + Equity
Date Cash + Accounts
Receivable +Office
Supplies +Office
Equipment +Electrical
Equipment =Accounts
Payable +S. Sony,
Capital -
S. Sony,
With-dra
wals
+ 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
1-5
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Problem 1-9A (Continued)
Part 3
Sony Electric
Income Statement
For Month Ended December 31
Revenues
Electrical fees earned...................... $7,100
Expenses
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
1-6
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
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)
Cash flows from investing activities
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:
1-7
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
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
revenues and net income numbers for Kyzera we obtain:
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
3. Success in returning net income from the average amount invested is
4. The reported figures suggest that Coca-Cola yields a marginally higher
Nevertheless, and because the returns are not dramatically different, we
would look for additional information in financial statements and other
1-8
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Education.
also look for consumer trends, market expansion, competition, product
development, and promotion plans.
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.
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.
1-9
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Education.
If financial statements are to be informative about an organization’s
1-10
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
