Problem 1-8A (Concluded)
Part 3—continued
Ander 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 paid for supplies …………………………………………
(800)
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
Withdrawals by owner ………………………………………….
(950)
Net cash provided by financing activities ……………..
64,050
Net increase in cash …………………………………………….
$59,180
Cash balance, Dec. 1 ……………………………………………
0
Cash balance, Dec. 31 ………………………………………….
$59,180
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:
Fundamental Accounting Principles, 21st Edition
32
Problem 1-9A (60 minutes) Parts 1 and 2
Assets
=
Liabilities
+
Equity
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Building
=
Accounts
Payable
+
Notes
Payable
+
I. Lopez,
Capital
–
I. Lopez,
With-
drawals
+
Reve-
nues
–
Expen-
ses
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
Bal.
34,500
+
1,200
+
26,700
+
150,000
=
2,900
+
130,000
+
80,000
–
500
f.
+
$2,800
+
$2,800
Bal.
34,500
+
2,800
+
1,200
+
26,700
+
150,000
=
2,900
+
130,000
+
80,000
+
2,800
–
500
g.
+ 4,000
+
4,000
Bal.
38,500
+
2,800
+
1,200
+
26,700
+
150,000
=
2,900
+
130,000
+
80,000
+
6,800
–
500
h.
– 3,275
–
$3,275
Bal.
35,225
+
2,800
+
1,200
+
26,700
+
150,000
=
2,900
+
130,000
+
80,000
–
3,275
+
6,800
–
500
i.
+ 1,800
–
1,800
Bal.
37,025
+
1,000
+
1,200
+
26,700
+
150,000
=
2,900
+
130,000
+
80,000
–
3,275
+
6,800
–
500
j.
– 700
– 700
Bal.
36,325
+
1,000
+
1,200
+
26,700
+
150,000
=
2,200
+
130,000
+
80,000
–
3,275
+
6,800
–
500
k.
– 1,800
–
1,800
Bal.
$34,525
+
$1,000
+
$1,200
+
$26,700
+
$150,000
=
$2,200
+
$130,000
+
$80,000
–
$3,275
+
$6,800
–
$2,300
Problem 1-9A (Concluded)
Part 3
Problem 1-10A (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
return is better than PepsiCo‘s 9.2% return.
4. Current performance 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 1-11A (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
competitors’ 12% return.
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
plus equity) must equal the total for assets (investing). Since average
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)
1.
F
5.
I
2.
I
6.
O
3.
I
7.
O
4.
F
8.
O
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 (40 minutes)
Part 1
Company V
(a) and (b)
Calculation of equity: 12/31/2012 12/31/2013
Assets ………………………..
$54,000
$59,000
Liabilities ……………………
(25,000)
(36,000)
Equity …………………………
$29,000
$23,000
(c) Calculation of net income for 2013:
Equity, December 31, 2012 …………………… $29,000
Plus investments by owner ………………….. 5,000
Part 2
Company W
(a) Calculation of equity at December 31, 2012:
Assets …………………………………………………. $80,000
(b) Calculation of equity at December 31, 2013:
Equity, December 31, 2012 …………………… $20,000
Plus investments by owner ………………….. 20,000
(c) Calculation of the amount of liabilities at December 31, 2013:
Assets ………………………………………………….$100,000
Problem 1-1B (Continued)
Part 3
Company X
First, calculate the beginning and ending equity balances:
12/31/2012 12/31/2013
Assets ………………………..
$141,500
$186,500
Liabilities ……………………
(68,500)
(65,800)
Equity …………………………
$ 73,000
$120,700
Then, find the amount of investments by owner during 2013 as follows:
Equity, December 31, 2012 …………………………. $ 73,000
Plus investments by owner ………………………… ?
Plus net income …………………………………………. 18,500
Part 4
Company Y
First, calculate the beginning balance of equity:
Dec. 31, 2012
Assets …………………………………………………. $92,500
Next, find the ending balance of equity as follows:
Equity, December 31, 2012 …………………… $41,000
Plus investments by owner ………………….. 48,100
Plus net income …………………………………… 24,000
Finally, find the ending amount of assets by adding the ending balance of
equity to the ending balance of liabilities:
Dec. 31, 2013
Liabilities …………………………………………….. $ 42,000
Problem 1-1B (Concluded)
Part 5
Company Z
First, calculate the balance of equity as of December 31, 2013:
Assets …………………………………………………. $170,000
Next, find the beginning balance of equity as follows:
Equity, December 31, 2012 …………………… $ ?
Plus investments by owner ………………….. 60,000
Plus net income …………………………………… 32,000
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, 2012
Assets …………………………………………………. $144,000
Problem 1-2B (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
Pays cash for
salaries incurred
–
–
–
–
4
Provides ser-
vices for cash
+
+
+
+
5
Pays cash for
rent incurred
–
–
–
–
6
Incurs utilities
costs on credit
+
–
–
7
Buys store equip-
ment for cash
+/–
–
8
Owner withdraws
cash
–
–
–
9
Provides ser-
vices on credit
+
+
+
10
Collects cash on
receivable from (9)
+/–
+
Problem 1-3B (15 minutes)
Offshore Co.
Income Statement
For Year Ended December 31, 2013
Revenues …………………………………………. $68,000
Problem 1-4B (15 minutes)
TLC Company
Balance Sheet
December 31, 2013
Assets ………………………. $114,000 Liabilities …………………………. $ 64,000
Problem 1-5B (15 minutes)
HalfLife Co.
Statement of Cash Flows
For Year Ended December 31, 2013
Cash used by operating activities …………………. $(3,000)
Cash from investing activities ……………………….. 1,600
Problem 1-6B (15 minutes)
ATV Company
Statement of Owner’s Equity
For Year Ended December 31, 2013
A.T. Vee, Capital, Dec. 31, 2012 ………………. $49,000
Add: Net income …………………………………. 5,000
©2013 by McGraw–Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Solutions Manual, Chapter 1
41
Problem 1-7B (60 minutes) Parts 1 and 2
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Equipment
=
Accounts
Payable
+
H. Nikolas,
Capital
–
H. Nikolas,
Withdrawals
+
Revenues
–
Expenses
June
1
+$130,000
=
+
$130,000
2
– 6,000
=
–
$6,000
4
+
$2,400
=
+ $2,400
6
– 1,150
=
–
1,150
8
+ 850
=
+
$ 850
14
+
$7,500
=
+
7,500
16
– 800
=
–
800
20
+ 7,500
–
7,500
=
21
+
7,900
=
+
7,900
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
Problem 1-7B (Continued)
Part 3
Holly’s Maintenance Co.
Income Statement
For Month Ended June 30
Revenues
Maintenance services revenue ………. $16,925
Expenses
Rent expense ………………………………… $6,000
Salaries expense …………………………... 1,600
Holly’s Maintenance Co.
Statement of Owner’s Equity
For Month Ended June 30
H. Nikolas, Capital, June 1 ………………………….. $ 0
Add: Investment by owner ………………………. 130,000
Holly’s Maintenance Co.
Balance Sheet
June 30
Assets
Liabilities
Cash …………………………..
$130,060
Accounts payable ……………………..
$ 0
Accounts receivable ……..
675
Equity
Equipment …………………...
2,400
H. Nikolas, Capital ……………..……..
133,135
_______
________
Total assets ………………....
$133,135
Total liabilities and equity …………….
$133,135
Problem 1-7B (Concluded)
Part 3—continued
Holly’s Maintenance Co.
Statement of Cash Flows
For Month Ended June 30
Cash flows from operating activities
Cash received from customers1 …………………………...
$ 16,250
Cash paid for rent ………………………………………………..
(6,000)
Cash paid for advertising ……………………………………..
(1,150)
Cash paid for telephone ……………………………………….
(150)
Cash paid for utilities …………………………………………..
(890)
Cash paid to employees ……………………………………….
(1,600)
Net cash provided by operating activities ……………..
$ 6,460
Cash flows from investing activities
Purchase of equipment ………………………………………..
(2,400)
Net cash used by investing activities ……………………
(2,400)
Cash flows from financing activities
Investments by owner ………………………………………….
130,000
Withdrawals by owner ………………………………………….
(4,000)
Net cash provided by financing activities ……………..
126,000
Net increase in cash …………………………………………….
$130,060
Cash balance, June 1 …………………………………………..
0
Cash balance, June 30 …………………………………………
$130,060
1$850 + $7,500 + $7,900 = $16,250