Exercise 1-14 (10 minutes)
Return on assets
=
Net income / Average total assets
=
$40,000 / [($200,000 + $300,000)/2]
=
16%
Interpretation: Swiss Group’s return on assets of 16% is markedly above
the 10% return of its competitors. Accordingly, its performance is
assessed as superior to its competitors.
Exercise 1-15 (15 minutes)
ERNST CONSULTING
Income Statement
For Month Ended October 31
Revenues
Consulting fees earned …………………. $14,000
Exercise 1-16 (15 minutes)
ERNST CONSULTING
Statement of Retained Earnings
For Month Ended October 31
Retained earnings, October 1 ……………………. $ 0
Exercise 1-17 (15 minutes)
ERNST CONSULTING
Balance Sheet
October 31
Assets Liabilities
Cash …………………………. $11,360 Accounts payable …………….. $ 8,500
* For the computation of this amount see Exercise 1-16.
Exercise 1-18 (15 minutes)
ERNST CONSULTING
Statement of Cash Flows
For Month Ended October 31
Exercise 1-19 (10 minutes)
I 1. Cash purchase of equipment O 5. Cash paid on an account payable
Exercise 1-20 (20 minutes)
BMW GROUP
Income Statement
For Year Ended December 31, 2013
(Euros in millions)
Revenues ……………………………………………………………. € 68,821
Expenses
Exercise 1-21B (10 minutes)
a. Financing*
b. Financing
PROBLEM SET A
Problem 1-1A (25 minutes)
Balance Sheet
Income
Statement
Statement of
Cash Flows
Transaction
Total
Liab.
Total
Equity
Net
Income
Operating
Activities
Investing
Activities
Financing
Activities
1
Owner invests
cash for its stock
+
+
2
Receives cash
for services
provided
+
+
+
3
Pays cash for
employee wages
–
–
–
4
Incurs legal
costs on credit
+
–
–
5
Borrows cash
by signing L-T
note payable
+
+
6
Buys office
equipment
for cash
–
7
Buys land by
signing note
payable
+
8
Provides ser-
vices on credit
+
+
9
Pays cash
dividend
–
–
10
Collects cash
on receivable
from (8)
+
Problem 1-2A (40 minutes)
Part 1
Company A
(a) Equity on December 31, 2014:
Assets …………………………………………………. $55,000
Liabilities …………………………………………….. (24,500)
Part 2
Company B
(a) and (b)
Equity: 12/31/2014 12/31/2015
(c) Net income for 2015:
Equity, December 31, 2014 ………………… $12,500
Problem 1-2A (Continued)
Part 3
Company C
First, calculate the beginning balance of equity:
Dec. 31, 2014
Next, find the ending balance of equity by completing this table:
Equity, December 31, 2014 …………………… $15,000
Finally, find the ending amount of assets by adding the ending balance of
equity to the ending balance of liabilities:
Dec. 31, 2015
Part 4
Company D
First, calculate the beginning and ending equity balances:
12/31/2014 12/31/2015
Then, find the amount of investment by owner during 2015:
Equity, December 31, 2014 …………………….. $20,000
Plus stock issuances …………………………….. ?
Problem 1-2A (Concluded)
Part 5
Company E
First, compute the balance of equity as of December 31, 2015:
Assets …………………………………………………. $113,000
©2016 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
23
Problem 1-3A (15 minutes)
Armani Company
Balance Sheet
December 31, 2015
Problem 1-4A (15 minutes)
Edison Energy Company
Income Statement
For Year Ended December 31, 2015
Problem 1-5A (15 minutes)
Kojo Company
Statement of Retained Earnings
For Year Ended December 31, 2015
©2016 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.
Financial Accounting Fundamentals, 5th Edition
24
Problem 1-6A (15 minutes)
Kia Company
Statement of Cash Flows
For Year Ended December 31, 2015
Cash from operating activities …………………… $ 6,000
©2016 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
25
Problem 1-7A (60 minutes) Parts 1 and 2
Assets = Liabilities + Equity
Date
Cash
+
Accounts
Receivable
+
Office
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Revenues
–
Expenses
May
1
+$40,000
=
+
$40,000
1
– 2,200
=
–
$2,200
3
+
$1,890
=
+ $1,890
5
– 750
`
=
–
750
8
+ 5,400
=
+
$5,400
12
+
$2,500
=
+
2,500
15
– 750
=
–
750
20
+ 2,500
–
2,500
=
22
+
3,200
=
+
3,200
25
+ 3,200
–
3,200
=
26
– 1,890
=
– 1,890
27
=
+ 80
–
80
28
– 750
=
–
750
30
– 300
=
–
300
30
– 280
=
–
280
31
– 1,400
=
–
$1,400
$42,780
+
$ 0
+
$1,890
=
$ 80
+
$40,000
–
$1,400
+
$11,100
–
$5,110
Problem 1-7A (Continued)
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 Retained Earnings
For Month Ended May 31
The Gram Co.
Balance Sheet
May 31
Assets Liabilities
Cash ………………………….$42,780 Accounts payable …………………… $ 80
Office equipment ………. 1,890 Equity
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 paid for telephone ……………………………………..
(300)
Cash paid for utilities …………………………………………
(280)
Cash paid to employees …………………………………….
(1,500)
Net cash provided by operating activities …………..
$ 6,070
Cash flows from investing activities
Purchase of equipment ………………………………………
(1,890)
Net cash used by investing activities ………………….
(1,890)
Cash flows from financing activities
Investment from stockholders …………………………...
40,000
Cash dividends ………………………………………………….
(1,400)
Net cash provided by financing activities ……………
38,600
Net increase in cash …………………………………………..
$42,780
Cash balance, May 1 ………………………………………….
0
Cash balance, May 31 ………………………………………..
$42,780
©2015 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.
Financial Accounting Fundamentals, 5th Edition
28
Problem 1-8A (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 1-8A (Concluded)
Part 3
Biz Consulting’s net income = $6,800 – $2,300 = $4,500
©2015 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.
Financial Accounting Fundamentals, 5th Edition
30
Problem 1-9A (60 minutes) Parts 1 and 2
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Electrical
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
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
15
+
$5,000
+
5,000
Bal.
59,600
+
5,000
+
800
+
2,530
+
13,000
=
10,730
+
65,000
+
6,200
–
1,000
18
+
350
+ 350
Bal.
59,600
+
5,000
+
1,150
+
2,530
+
13,000
=
11,080
+
65,000
+
6,200
–
1,000
20
– 2,530
– 2,530
Bal.
57,070
+
5,000
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
6,200
–
1,000
24
+
900
+
900
Bal.
57,070
+
5,900
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
7,100
–
1,000
28
+ 5,000
–
5,000
Bal.
62,070
+
900
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
7,100
–
1,000
29
– 1,400
–
1,400
Bal.
60,670
+
900
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
7,100
–
2,400
30
– 540
–
540
Bal.
60,130
+
900
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
7,100
–
2,940
31
– 950
–
$950
Bal.
$59,180
+
$ 900
+
$1,150
+
$2,530
+
$13,000
=
$8,550
+
$65,000
–
$950
+
$7,100
–
$2,940