P2-3. Understanding the accounting equation
Flaps Inc.
Balance Sheet
Year
2016
2017
2018
2019
2020
Assets
Stockholders’ Equity
Item E: 2016 Total stockholders’ equity: Contributed capital ($2,340) plus
Item F: 2017 Total liabilities and stockholders’ equity: Total liabilities ($8,683)
Item G: 2017 Contributed capital: Common stock ($139) plus additional paid-in
Item H: 2017 Total assets: Total assets are equal to total liabilities and
Item I: 2017 Noncurrent liabilities: Current liabilities plus noncurrent liabilities is
Item J: 2017 Current assets: Current assets plus noncurrent assets equals
Item K: 2018 Total liabilities and stockholders’ equity: Total liabilities and
Item L: 2018 Common stock: Common stock plus additional paid-in capital
Item M: 2018 Noncurrent assets: Current assets plus noncurrent assets equals
Item N: 2018 Total liabilities: Current liabilities ($3,467) plus noncurrent
Item O: 2018 Total stockholders’ equity: Contributed capital ($2,387) plus
Item P: 2019 Total liabilities and stockholders’ equity: Total liabilities ($8,929)
Item Q: 2019 Retained earnings: Contributed capital plus retained earnings
equals total stockholders’ equity. Accordingly, total stockholders’ equity
Item R: 2019 Total assets: Total assets are equal to total liabilities and
Item S: 2019 Noncurrent liabilities: Current liabilities plus noncurrent liabilities
Item T: 2019 Additional paid-in capital: Common stock plus additional paid-in
Item U: 2020 Total liabilities and stockholders’ equity: Total liabilities and
Item V: 2020 Current liabilities: Take total liabilities and stockholders’ equity
($14,351) which was calculated in (U), less total stockholders’ equity
Item W: 2020 Contributed Capital: Common stock ($144) plus additional
Item X: 2020 Noncurrent assets: Current assets plus noncurrent assets equals
Item Y: 2020 Retained earnings: Contributed capital plus retained earnings
Item Z: 2020 Total liabilities: Total liabilities and stockholders’ equity ($14,351),
P2-4. Understanding the accounting equation
Bob Touret, Inc.
Year
2016
2017
2018
2019
2020
Assets
Stockholders’ Equity
Other Information
Items in bold are unknowns solved below. Items are not necessarily solved in
alphabetical order.
Item A: 2016 Current assets: Current assets plus noncurrent assets equals total
Item C: 2016 Total stockholders’ equity: Contributed capital ($1,250) plus retained
Item D: 2016 Total liabilities and stockholders’ equity: Total liabilities and stockholders’
Item B: 2016 Noncurrent liabilities: Total liabilities and stockholders’ equity ($6,748)
less total stockholders’ equity ($3,000) is equal to total liabilities ($3,748).
Item E: 2016 Working capital: Current assets ($2,746) less current liabilities ($1,536)
Item H: 2017 Current liabilities: Current assets less current liabilities equals working
Item F: 2017 Noncurrent assets: Current assets plus noncurrent assets equals total
Item J: 2017 Retained earnings: Beginning of the year retained earnings ($1,750)
Item I: 2017 Contributed capital: Contributed capital plus retained earnings equals
Item L: 2018 Current assets: Current assets plus noncurrent assets equals total
Item N: 2018 Current liabilities: Current assets less current liabilities equals working
Item O: 2018 Noncurrent liabilities: Total liabilities and stockholders’ equity ($6,916)
less total stockholders’ equity ($3,056) equals total liabilities ($3,860). Current
Item P: 2018 Contributed capital: Contributed capital plus retained earnings equals
Item Q: 2018 Net income (loss): Beginning of the year retained earnings plus net
income less dividends equals end of the year retained earnings. Therefore, end
Item R: 2019 Noncurrent assets: Current assets plus noncurrent assets equals total
Item T: 2019 Retained earnings: Beginning of the year retained earnings plus net
income less dividends equals end of the year retained earnings. Therefore, end
Item U: 2019 Total stockholders’ equity: Contributed capital ($1,300) plus retained
Item S: 2019 Current liabilities: Total liabilities and stockholders’ equity ($7,008) less
total stockholders’ equity ($3,101) equals total liabilities ($3,907). Current
Item V: 2019 Working capital: Current assets ($2,778) less current liabilities ($1,701)
Item W: 2019 Dividends: Beginning of the year retained earnings plus net income,
less dividends, equals end of the year retained earnings. Accordingly, end of
Item X: 2020 Current assets: Current assets less current liabilities equals working
Item Y: 2020 Total assets: Current assets ($2,234) plus noncurrent assets ($4,805)
Item BB: 2020 Total liabilities and stockholders’ equity: Total liabilities and
Item AA: 2020 Total stockholders’ equity: Current liabilities ($1,463) plus noncurrent
Item Z: 2020 Contributed capital: Contributed capital plus retained earnings equals
P2-5. Converting from cash to accrual basis
Requirement 1:
Accounts receivable
Requirement 2:
Salaries payable
Solve for:
$44,000 salary expense
Requirement 3:
Accounts payable
$134,000 Solve for: purchases on account
We can now solve for Cost of goods sold by using the amount of inventory
purchases in the analysis of the Inventory account.
Inventory
$142,000 Solve for: cost of goods sold
P2-6. Journal entries and statement preparation
CR Accumulated depreciation
[($30,000 – $5,000)/ 60 months]
CR Cash
$10,000
CR Cash
800
CR Sales revenue
$35,000
CR Accounts receivable
$26,000
CR Inventory
9,000
($15,000 x .60 = $9,000)
CR Wages payable
400
CR Cash
5,200
CR Notes payable
$12,000
CR Cash
3,000
CR Interest payable
450
Bob’s Chocolate Chips and More
Income Statement
For Month Ended October 31, 2017
Less: Operating expenses
Bob’s Chocolate Chips and More
Balance Sheet
October 31, 2017
Assets
Liabilities
Shareholders’ equity