1-21
1-22
EXERCISE 1-12A (cont.)
d.
Harris Company
Accounting Equation
Event
Assets
=
Liabilities
+
Stockholders’ Equity
Acquired assets
$7,800
$3,600
$4,200
Incurred loss
(4,900)
(700)
(4,200)
Balance
$2,900
$2,900
($ 0)
While creditors get first priority to receive assets in a business
liquidation, this does not mean they cannot lose all or a portion of the
assets they loan a business. In this case creditors are owed $3,600 but
the business has only $2,900 of assets. Since the creditors have first
priority, the entire $2,900 would be distributed to them. In this case
the creditors lose $700 ($3,600 original loan – $2,900 returned). Since
the investors own the business, they suffer the losses earned by the
business. The investors will lose the entire $4,200 they contributed to
the business.
1-23
1-24
EXERCISE 1-13A
Event
Classification
1.
Asset Source
2.
Asset Use
3.
Asset Use
4.
Asset Source
5.
Asset Exchange
6.
NA
7.
Asset Source
8.
Asset Use
9.
Asset Source
10.
Asset Exchange
11.
Asset Source
EXERCISE 1-14A
Steps:
1.
Common Stock Issued = Change in Common Stock
2.
Change in Stk. Equity = Change in Com. Stock + Change in Ret. Earn.
3.
Increase in Ret. Earn. = Net Income − Dividends
Alternate Solution:
From the Statement of Changes in Stockholders’ Equity we know (with
1-26
1-27
EXERCISE 1-15A
a.
Majka Company
Accounting Equation for 2016
Assets
=
Liabilities
+
Stockholders’ Equity
Common
Retained
Event
Cash
=
+
Stock
+
Earnings
1. Cash revenues
28,600
NA
NA
28,600
2. Paid expenses
(13,200)
NA
NA
(13,200)
3. Paid dividend
(1,500)
NA
NA
(1,500)
Ending Balance
13,900
=
-0-
+
-0-
+
13,900
b.
Majka Company
Income Statement
For the Year Ended December 31, 2016
Revenue
$28,600
Expense
(13,200)
Net Income
$ 15,400
Majka Company
Statement of Changes in Stockholders’ Equity
For the Year Ended December 31, 2016
Beginning Common Stock
$ -0-
Plus: Common Stock Issued
0
Ending Common Stock
$ -0-
Beginning Retained Earnings
$ -0-
Plus: Net Income
15,400
Less: Dividends
(1,500)
Ending Retained Earnings
13,900
Total Stockholders’ Equity
$13,900
1-28
EXERCISE 1-15A (cont.)
Majka Company
Balance Sheet
As of December 31, 2016
Assets
Cash
$13,900
Liabilities
$ -0-
Stockholders’ Equity
Common Stock
$ -0-
Retained Earnings
13,900
Total Stockholders’ Equity
13,900
Total Liabilities and Stockholders’ Equity
$13,900
1-29
EXERCISE 1-16A
Note: The memo should contain a reference to the fact that the value of
prepared.
1-30
EXERCISE 1-17A
a.
Moore Company
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Net Cash Inflow from Operating Activities
$ 24,800
Cash Flows From Investing Activities:
Net Cash Outflow from Investing Activities
(16,000)
Cash Flows From Financing Activities:
Net Cash Outflow from Financing Activities
(6,800)
Net Increase in Cash
2,000
Plus: Beginning Cash Balance
45,800
Ending Cash Balance
$47,800
1-31
1-32
EXERCISE 1-18A a.
Event
Statement of Cash Flow Classification
1.
OA
2.
IA
3.
NA
4.
FA
5.
FA
6.
OA
7.
IA
8.
FA
9.
OA
10.
FA
b.
All Star Automotive Company
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Cash Receipts from Revenue
$ 25,000
Cash Payment for Salary Expense
(14,000)
Cash Payments for Utilities Expense
(2,800)
Net Cash Flow from Operating Activities
$8,200
Cash Flows From Investing Activities
Cash from the Sale of Land
$ 9,000
Cash Paid to Purchase Land
(6,000)
Net Cash Flow from Investing Activities
3,000
Cash Flows From Financing Activities:
Cash Receipts from Stock Issue
$ 50,000
Cash Receipts from Loan
5,000
Cash Payment on Loan
(10,000)
Cash Payments for Dividends
(5,000)
Net Cash Flow from Financing Activities
40,000
Net Increase in Cash
51,200
Plus: Beginning Cash Balance
9,000
Ending Cash Balance
$60,200
1-33
EXERCISE 1-19A
a.
Dakota Company
Accounting Equation for 2016
Assets
=
Liabilities
+
Stockholders’ Equity
Event
Cash
+
Land
=
Notes
Payable
+
Com.
Stock
+
Retained
Earnings
Acct.
Title/RE
Bal. 1/1/16
2,000
12,000
-0-
6,000
8,000
1. Issued stk.
30,000
NA
NA
30,000
NA
NA
2. Pur. Land
(12,000)
12,000
NA
NA
NA
NA
3. Loan
10,000
NA
10,000
NA
NA
NA
4. Provide Svc.
20,000
NA
NA
NA
20,000
Svc. Rev.
5. Paid Utilities
(1,000)
NA
NA
NA
(1,000)
Util. Exp.
6. Pd. Op. Exp.
(15,000)
NA
NA
NA
(15,000)
Op. Exp.
7. Paid Div.
(2,000)
NA
NA
NA
(2,000)
Dividends
8. Land Value
NA
NA
NA
NA
NA
Totals
32,000
+
24,000
=
10,000
+
36,000
+
10,000
b.
Dakota Company
Income Statement
For the Year Ended December 31, 2016
Service Revenue
$20,000
Utilities Expense
(1,000)
Operating Expense
(15,000)
Net Income
$ 4,000
EXERCISE 1-19A b. (cont.)
Dakota Company
Statement of Changes in Stockholders’ Equity
For the Year Ended December 31, 2016
Beginning Common Stock
$ 6,000
Plus: Common Stock Issued
30,000
Ending Common Stock
$36,000
Beginning Retained Earnings
$ 8,000
Plus: Net Income
4,000
Less: Dividends
(2,000)
Ending Retained Earnings
10,000
Total Stockholders’ Equity
$46,000
Assets
Cash
Land
Total Assets
$56,000
Liabilities
Notes Payable
Total Liabilities
$10,000
Stockholders’ Equity
Common Stock
Retained Earnings
Total Stockholders’ Equity
46,000
1-35
1-36
EXERCISE 1-19A b. (cont.)
Dakota Company
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows From Operating Activities:
Cash Receipts from Customers
$20,000
Cash Payment for Utilities Expense
(1,000)
Cash Payments for Other Operating Exp.
(15,000)
Net Cash Flow from Operating Activities
$ 4,000
Cash Flows From Investing Activities:
Cash Paid to Purchase Land
$(12,000)
Net Cash Flow from Investing Activities
(12,000)
Cash Flows From Financing Activities:
Cash Receipts from Stock Issue
$30,000
Cash Receipts from Loan
10,000
Cash Payments for Dividends
(2,000)
Net Cash Flow from Financing Activities
38,000
Net Increase in Cash
30,000
Plus: Beginning Cash Balance
2,000
Ending Cash Balance
$32,000
1-37
EXERCISE 1-20A
a.
Riley Company: Asset Exchange
b.
Smally Company: Asset Exchange
c.
Riley Company: Investing Activity
d.
Smally Company: Investing Activity
EXERCISE 1-21A
a.
Carter Company
Accounting Equation as of January 1, 2016
Assets
=
Liabilities
+
Stockholders’ Equity
Notes
Common
Retained
Cash
+
Land
=
Payable
+
Stock
+
Earnings
$800
$3,500
$600
$1,000
?
Accounting Equation as of January 1, 2016
Assets
=
Liabilities
+
Stockholders’ Equity
Notes
Common
Retained
Cash
+
Land
=
Payable
+
+
Earnings
1-39
EXERCISE 1-21A (cont.)
g.
Carter Company
Accounting Equation as of December 31, 2016
Assets
=
Liabilities
+
Stockholders’ Equity
Notes
Common
Retained
Cash
+
Land
=
Payable
+
Stock
+
Earnings
$800
$3,500
$1,600
$1,000
1,700
1,800
NA
NA
NA
1,800
Rev.
(1,200)
NA
NA
NA
(1,200)
Exp.
(500)
NA
NA
NA
(500)
Div
900
$3,500
$1,600
$1,000
$1,800
Carter Company
Income Statement
For the Year Ended December 31, 2016
Revenue
$1,800
Expenses
(1,200)
Net Income
$ 600