Chapter 01 – Introducing Financial Accounting
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
Problem 1-7B (Continued)
Part 3
Holly’s Maintenance Co.
Income Statement
For Month Ended June 30
Revenues
Maintenance services revenue ………. $16,925
Expenses
Problem 1-8B (60 minutes) Parts 1 and 2
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Excavating
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Reve-
nues
–
Expen-
ses
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
15
+
$8,200
+
8,200
Bal.
85,300
+
8,200
+
600
+
2,300
+
5,000
=
6,300
+
80,000
+
15,800
–
700
17
+
3,100
+ 3,100
Bal.
85,300
+
8,200
+
3,700
+
2,300
+
5,000
=
9,400
+
80,000
+
15,800
–
700
23
– 2,300
– 2,300
Bal.
83,000
+
8,200
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
15,800
–
700
25
+
5,000
+
5,000
Bal.
83,000
+
13,200
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
20,800
–
700
28
+ 8,200
–
8,200
Bal.
91,200
+
5,000
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
20,800
–
700
30
– 1,560
–
1,560
Bal.
89,640
+
5,000
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
20,800
–
2,260
31
– 295
–
295
Bal.
89,345
+
5,000
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
20,800
–
2,555
31
– 1,800
–
$1,800
Bal.
$87,545
+
$ 5,000
+
$3,700
+
$2,300
+
$5,000
=
$7,100
+
$80,000
–
$1,800
+
$20,800
–
$2,555
Problem 1-8B (Concluded)
Part 3—continued
Truro Excavating Co.
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)
Cash paid for supplies …………………………………………
(600)
Cash paid for utilities …………………………………………..
(295)
Cash paid to employees ……………………………………….
(1,560)
Net cash provided by operating activities ……………..
$12,645
Cash flows from investing activities
Purchase of excavating equipment ……………………….
(1,000)
Purchase of office equipment ……………………………….
(2,300)
Net cash used by investing activities ……………………
(3,300)
Cash flows from financing activities
Investments by stockholder …………………………………
80,000
Dividends to stockholder ……………………………………..
(1,800)
Net cash provided by financing activities ……………..
78,200
Net increase in cash …………………………………………….
$87,545
Cash balance, July 1 …………………………………………….
0
Cash balance, July 31 …………………………………………..
$87,545
1$7,600 + $8,200 = $15,800
Part 4
If the $5,000 purchase on July 3 had been acquired through an additional
stockholder 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 1-9B (Concluded)
Part 3
Problem 1-10B (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
3. Success in returning net income from the amount invested is revealed
assets.
4. Current performance 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.