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P1-46A, cont.
Requirement 2d
Problems Group B
P1-47B Using the accounting equation for transaction analysis
Learning Objective 4
Cash $12,650
Meg McIntyre opened a public relations firm called Pop Chart on August 1, 2018. The following amounts summarize her business on August
31, 2018:
During September 2018, the business completed the following transactions:
a. Received contribution of $14,000 cash from Meg McIntyre in exchange for common stock.
b. Performed service for a client and received cash of $1,600.
c. Paid off the beginning balance of accounts payable.
d. Purchased office supplies from OfficeMax on account, $1,200.
e. Collected cash from a customer on account, $2,300.
f. Cash dividends of $1,500 were paid to stockholders.
g. Consulted for a new band and billed the client for services rendered, $4,000.
h. Recorded the following business expenses for the month:
Paid office rent: $900.
Paid advertising: $450.
Analyze the effects of the transactions on the accounting equation of Pop Chart using the format presented above.
SOLUTION
P1-48B Using the accounting equation for transaction analysis
Learning Objective 4
Cash $21,300
Cosmo Thomas started a new business, Thomas Gymnastics, and completed the following transactions during December:
Dec. 1 Received $19,000 cash from Thomas in exchange for common stock.
2 Received $3,800 cash from customers for services performed.
5 Paid $300 cash for office supplies.
9 Performed services for a customer and billed the customer for services rendered, $4,500.
10 Received $150 invoice for utilities due in two weeks.
15 Paid for advertising in the local paper, $350.
20 Paid utility invoice received on Dec. 10.
25 Collected cash in full from customer billed on Dec. 9.
28 Paid rent for the month, $2,600.
28 Paid $1,200 to assistant for wages.
30 Received $1,600 cash from customers for services performed.
31 Cash dividends of $3,000 were paid to stockholders.
Analyze the effects of the transactions on the accounting equation of Thomas Gymnastics using a format similar to Exhibit 1-6.
SOLUTION
P1-49B Preparing financial statements
Learning Objective 5
1. Net Income $97,600
Presented here are the accounts of Pembroke Bookkeeping Company for the year ended
December 31, 2018:
Land $ 10,000 Common Stock $ 29,000
Notes Payable 31,000 Accounts Payable 7,000
Property Tax Expense 3,100 Accounts Receivable 1,200
Dividends 28,000 Advertising Expense 12,000
Rent Expense 7,000 Building 147,400
Salaries Expense 64,000 Cash 2,800
Salaries Payable 800 Equipment 15,000
Service Revenue 192,000 Insurance Expense 1,700
Office Supplies 12,000 Interest Expense 6,600
Retained Earnings, Dec. 31, 2017 51,000
Requirements
1. Prepare Pembroke Bookkeeping Company’s income statement.
2. Prepare the statement of retained earnings.
3. Prepare the balance sheet.
SOLUTION
P1-50B Preparing financial statements
Learning Objective 5
b. Ending Retained Earnings $81,500
Pretty Pictures works weddings and prom-type parties. The balance of Retained Earnings was
$20,000 at December 31, 2017. At December 31, 2018, the business’s accounting records show
these balances:
Insurance Expense $ 6,000 Accounts Receivable $ 5,000
Cash 42,000 Notes Payable 10,000
Accounts Payable 13,000 Retained Earnings, Dec. 31, 2018 ?
Advertising Expense 4,500 Salaries Expense 30,000
Service Revenue 115,000 Equipment 85,500
Dividends 13,000 Common Stock 28,000
Prepare the following financial statements for Pretty Pictures for the year ended December 31,
2018:
a. Income statement.
b. Statement of retained earnings.
c. Balance sheet.
P1-51B Preparing financial statements
Learning Objective 5
Total Assets $48,700
The bookkeeper of Juniper Landscaping prepared the company’s balance sheet while the
accountant was ill. The balance sheet, shown on the next page, contains numerous errors. In
particular, the bookkeeper knew that the balance sheet should balance, so he plugged in the
retained earnings amount needed to achieve this balance. The retained earnings is incorrect. All
other amounts are correct, but some are out of place or should not be included on this statement.
Prepare a corrected balance sheet.
