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 ……………..
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 stockholder …………………………………
65,000
Dividends to stockholder ……………………………………..
(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:
Problem 1-9A (60 minutes) Parts 1 and 2
Assets
=
Liabilities
+
Equity
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Building
=
Accounts
Payable
+
Notes
Payable
+
Common
Stock
–
Dividends
+
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
3. Success in returning net income from the average amount invested is
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.
Financial & Managerial Accounting, 5th Edition
34
Problem 1-11A (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 1-12AA (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 2 Return: Expected winnings from your bet.
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.
If financial statements are to be informative about an organization’s
activities, then they will need to report on these three major activities. Also
note that planning is the glue that links and coordinates these three major
activities—it includes the ideas, goals, and strategies of an organization.
Financial & Managerial Accounting, 5th Edition
36
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
Part 2
Company W
(a) Calculation of equity at December 31, 2012:
Assets …………………………………………………. $80,000
Liabilities …………………………………………….. (60,000)
Equity …………………………………………………. $20,000
(b) Calculation of equity at December 31, 2013:
Equity, December 31, 2012 …………………… $20,000
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 stock issuances during 2013 as follows:
Equity, December 31, 2012 …………………………. $ 73,000
Plus stock issuances …………………………………. ?
Plus net income …………………………………………. 18,500
Less dividends to owner(s) ………………………… 0
Equity, December 31, 2013 …………………………. $120,700
Thus, the stock issuances must have been … $ 29,200
Part 4
Company Y
First, calculate the beginning balance of equity:
Dec. 31, 2012
Assets …………………………………………………. $92,500
Liabilities …………………………………………….. 51,500
Equity …………………………………………………. $41,000
Next, find the ending balance of equity as follows:
Equity, December 31, 2012 …………………… $41,000
Finally, find the ending amount of assets by adding the ending balance of
equity to the ending balance of liabilities:
Dec. 31, 2013
Financial & Managerial Accounting, 5th Edition
38
Problem 1-1B (Concluded)
Part 5
Company Z
First, calculate the balance of equity as of December 31, 2013:
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, 2012
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 for its stock
+
+
+
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
Pays cash
dividend
–
–
–
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
Financial & Managerial Accounting, 5th Edition
40
Problem 1-4B (15 minutes)
TLC Company
Balance Sheet
December 31, 2013
Problem 1-5B (15 minutes)
HalfLife Co.
Statement of Cash Flows
For Year Ended December 31, 2013
Cash used by operating activities …………………. $(3,000)
Problem 1-6B (15 minutes)
ATV Company
Statement of Retained Earnings
For Year Ended December 31, 2013
Retained earnings, Dec. 31, 2012 ……………. $49,000
Problem 1-7B (60 minutes) Parts 1 and 2
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
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
Financial & Managerial Accounting, 5th Edition
42
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
Holly’s Maintenance Co.
Statement of Retained Earnings
For Month Ended June 30
Retained earnings, June 1 ………………………….. $ 0
Holly’s Maintenance Co.
Balance Sheet
June 30
Assets
Liabilities
Cash …………………………..
$130,060
Accounts payable ……………………..
$ 0
Accounts receivable ……..
675
Equity
Equipment …………………...
2,400
Common stock …………………..……..
130,000
_______
Retained earnings ……………..……..
3,135
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 stockholder …………………………………
130,000
Dividends to stockholder …………………………..…………
(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