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Problem 1-9B (60 minutes) Parts 1 and 2
Assets = Liabilities + Equity
Date Cash +Accounts
Receivable +Office
Supplies +Office
Equipment +Roofing
Equipment =Accounts
Payable +R. Rivera,
Capital -
R. Rivera,
With-draw
als
+Reve-nue
s-Expen-se
s
July 1 + $80,000 = + $80,000
2- 700 -$700
Bal. 79,300 = 80,000 -700
3- 1,000 + $5,000 + $4,000
Bal. 78,300 + 5,000 = 4,000 + 80,000 -700
6- 600 + $ 600
Bal. 77,700 + 600 + 5,000 = 4,000 + 80,000 -700
8 + 7,600 + $7,600
Bal. 85,300 + 600 + 5,000 = 4,000 + 80,000 + 7,600 -700
10 + $2,300 + 2,300
Bal. 85,300 + 600 + 2,300 + 5,000 = 6,300 + 80,000 + 7,600 -700
Problem 1-9B (Continued)
Part 3
Rivera Roofing Company
Income Statement
For Month Ended July 31
Revenues
Roofing fees earned ................................. $20,800
Expenses
Rent expense............................................. $ 700
Rivera Roofing Company
Statement of Owner’s Equity
For Month Ended July 31
R. Rivera, Capital, July 1........................... $ 0
Rivera Roofing Company
Balance Sheet
July 31
Assets Liabilities
Cash................................... $ 87,545 Accounts payable.............. $ 7,100
Accounts receivable......... 5,000
Office supplies.................. 3,700 Equity
Office equipment............... 2,300 R. Rivera, Capital................ 96,445
Roofing equipment........... 5,000 ________
Total assets....................... $103,545 Total liabilities & equity...... $103,545
Problem 1-9B (Concluded)
Part 3—continued
Rivera Roofing Company
Statement of Cash Flows
For Month Ended July 31
Cash flows from operating activities
Cash received from customers1................................. $15,800
Cash paid for rent....................................................... (700)
1$7,600 + $8,200 = $15,800
Part 4
If the $5,000 purchase on July 3 had been acquired through an additional
owner investment of cash, then:
(a) total assets would be larger by $1,000,
(b) total liabilities would be $4,000 smaller, and
(c) total equity would be $5,000 larger
Problem 1-10B (15 minutes)
1. Return on assets is net income divided by average total assets (the
2. Return on assets does not seem satisfactory for the risk involved in
3. We know that revenues less expenses equal net income. Taking the
4. We know from the accounting equation that the total of liabilities plus
Problem 1-11B (15 minutes)
1. Return on assets equals net income divided by average total assets.
2. On strictly the amount of sales to consumers, AT&T’s sales of $126,723
are greater than Verizon’s sales of $110,875.
3. Success in returning net income from the amount invested is revealed
4. The reported figures suggest Verizon is more successful in generating
income based on assets. Based on this information alone, we would be
better advised to invest in Verizon than AT&T.
Nevertheless, we would look for additional information in financial
1-4
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Education.
statements and other sources for further guidance. For example, if
AT&T could reduce its expenses, or reduce its assets without reducing
Problem 1-12BA (20 minutes)
Case 1. Return: No return is generated.
Risk: Moderate Risk. By hiding money at home a person
risks loss by theft or fire. Also such a strategy
might result in a loss of purchasing power in the
event of inflation.
government back savings bonds.
Problem 1-13BB (15 minutes)
1. O 5. O
4. O 8. O
Problem 1-14BB (15 minutes)
I. Financing Activities
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Education.
A. Owner financing—owner invests in the company
B. Non-owner (creditor) financing—borrowing money from a bank
II. Investing Activities
A. Buying resources (assets)
B. Selling resources (assets)
III. Operating Activities
A. Use of assets to carry out plans
B. Management of internal functions—R&D, marketing, and so forth
[Note: Planning activities are the ideas, goals, and tactics for implementing
financing, investing, and operating activities.]
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Education.
Serial Problem — SP 1 Business Solutions
Assets =Liabilities + Equity
Date Cash +Accounts
Receivable +Computer
Supplies +Computer
System +Office
Equipment =Accounts
Payable +S. Rey,
Capital -S. Rey,
Withdrawals +Revenues -Expenses
Oct. 1+$45,000 $20,000 + $8,000 + $73,000
3 + $1,420 + $1,420
Bal. 45,000 + 1,420 + 20,000 + 8,000 = 1,420 + 73,000
6 + $4,800 + $ 4,800
Bal. 45,000 + 4,800 + 1,420 + 20,000 + 8,000 = 1,420 + 73,000 + 4,800
8- 1,420 - 1,420
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Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Reporting in Action — BTN 1-1
1. An organization’s total assets are equal to its total liabilities plus total
2. Return on assets is net income divided by the average total assets
3. We know that net income equals total revenues less total expenses. For
Apple, we are told net income is $37,037 and revenues are $170,910.
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Education.
