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 Retained Earnings
For Month Ended December 31
Retained earnings, December 1 ……………. $ 0
Sony Electric
Balance Sheet
December 31
Assets Liabilities
Cash …………………………... $59,180 Accounts payable ……………….. $ 8,550
Accounts receivable …… 900
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 paid for supplies …………………………………………
(800)
(540)
Cash paid to employees ……………………………………….
(1,400)
$ 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 from stockholders …………………………….
65,000
Cash dividends…………………………………………………….
(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:
(a) total owner investments during this period, as well as the ending equity,
would be $16,000 lower,
(b) total liabilities would be $16,000 greater, and
(c) total assets would remain the same.
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
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
return on assets than PepsiCo. Based on this information alone, we
would be better advised to invest in Coca-Cola than PepsiCo.
Problem 1-12AA (20 minutes)
Case 1 Return: 5% interest or $100/year.
Case 2 Return: Expected winnings from your bet.
Case 3 Return: Expected return on your stock investment (both
Case 4 Return: Expected increase in career earnings and other
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
Problem 1-1B (25 minutes)
Balance Sheet
Income
Statement
Statement of
Cash Flows
Transaction
Total
Assets
Total
Liab.
Total
Equity
Net
Income
Operating
Activities
Investing
Activities
Financing
Activities
1
Owner invests
cash for its stock
+
+
+
2
Buys building by
signing note
payable
+
+
3
Buys store equip-
ment for cash
+/–
–
4
Provides ser-
vices for cash
+
+
+
+
5
Pays cash for
rent incurred
–
–
–
–
6
Incurs utilities
costs on credit
+
–
–
7
Pays cash for
salaries incurred
–
–
–
–
8
Pays cash
dividend
–
–
–
9
Provides ser-
vices on credit
+
+
+
10
Collects cash on
receivable from (9)
+/–
+
Problem 1-2B (40 minutes)
Part 1
Company V
(a) and (b)
Calculation of equity: 12/31/2014 12/31/2015
Assets ………………………..
$54,000
$59,000
Liabilities ……………………
(25,000)
(36,000)
Equity …………………………
$29,000
$23,000
(c) Calculation of net income for 2015:
Equity, December 31, 2014 …………………… $29,000
Plus stock issuances …………………………... 5,000
Plus net income …………………………………… ?
Less dividends ……………………………………. (5,500)
Equity, December 31, 2015 …………………… $23,000
Therefore, the net loss must have been $(5,500).
Part 2
Company W
(a) Calculation of equity at December 31, 2014:
Assets …………………………..…………………….. $80,000
Liabilities …………………………………………….. (60,000)
Equity………………………………………………….. $20,000
(b) Calculation of equity at December 31, 2015:
Equity, December 31, 2014 …………………… $20,000
Plus stock issuances …………………………... 20,000
Plus net income …………………………………… 40,000
Less dividends ……………………………………. (2,000)
Equity, December 31, 2015 …………………… $78,000
(c) Calculation of the amount of liabilities at December 31, 2015:
Assets …………………………..……………………..$100,000
Equity………………………………………………….. (78,000)
Liabilities …………………………………………….. $ 22,000
Problem 1-2B (Continued)
Part 3
Company X
First, calculate the beginning and ending equity balances:
12/31/2014 12/31/2015
Assets ………………………..
$141,500
$186,500
Liabilities ……………………
(68,500)
(65,800)
Equity …………………………
$ 73,000
$120,700
Then, find the amount of investments by owner during 2015 as follows:
Equity, December 31, 2014 …………………………. $ 73,000
Plus stock issuances …………………………………. ?
Plus net income …………………………………………. 18,500
Less dividends ………………………………………….. 0
Equity, December 31, 2015 …………………………. $120,700
Thus, the owner’s investments must have been $ 29,200
Part 4
Company Y
First, calculate the beginning balance of equity:
Dec. 31, 2014
Assets …………………………..…………………….. $92,500
Liabilities …………………………………………….. 51,500
Equity………………………………………………….. $41,000
Next, find the ending balance of equity as follows:
Equity, December 31, 2014 …………………… $41,000
Problem 1-2B (Concluded)
Part 5
Company Z
First, calculate the balance of equity as of December 31, 2015:
Assets …………………………..…………………….. $170,000
Liabilities …………………………………………….. (42,000)
Problem 1-3B (15 minutes)
Safari Company
Balance Sheet
December 31, 2015
Problem 1-4B (15 minutes)
Solar Company
Income Statement
For Year Ended December 31, 2015
Problem 1-5B (15 minutes)
Audi Company
Statement of Retained Earnings
For Year Ended December 31, 2015
Problem 1-6B (15 minutes)
Banji Company
Statement of Cash Flows
For Year Ended December 31, 2015
Cash used by operating activities …………………. $(3,000)
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