CHAPTER 1 Introduction to Accounting and Business
1–21
Prob. 1–5A
1.
Assets
=
Liabilities
+
Cash
+
Accounts
Receivable
+
Supplies
+
Land
=
Accounts
Payable
+
Common
Stock
+
Retained
Earnings
$45,000
+
$93,000
+
$7,000
+
$75,000
=
$40,000
+
$60,000
+
Retained
Earnings
$220,000
=
$100,000
+
$120,000
=
Retained Earnings
1–22
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Prob. 1–5A (Continued)
2.
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+
Accts.
Rec.
+
Supplies
+
Land
=
Accts.
Payable
+
Common
Stock
+
Retained
Earnings
–
Dividends
Bal.
a.
+
45,000
35,000
93,000
7,000
75,000
40,000
60,000
+ 35,000
120,000
Bal.
80,000
93,000
7,000
75,000
40,000
95,000
120,000
b.
–
50,000
+ 50,000
Bal.
30,000
93,000
7,000
125,000
40,000
95,000
120,000
c.
+
32,125
Bal.
62,125
93,000
7,000
125,000
40,000
95,000
120,000
d.
–
6,000
Bal.
56,125
93,000
7,000
125,000
40,000
95,000
120,000
e.
+ 2,500
+ 2,500
Bal.
56,125
93,000
9,500
125,000
42,500
95,000
120,000
f.
–
22,800
– 22,800
Bal.
33,325
93,000
9,500
125,000
19,700
95,000
120,000
g.
+ 84,750
Bal.
33,325
177,750
9,500
125,000
19,700
95,000
120,000
h.
+ 29,500
Bal.
33,325
177,750
9,500
125,000
49,200
95,000
120,000
i.
–
14,000
Bal.
19,325
177,750
9,500
125,000
49,200
95,000
120,000
j.
+
88,000
– 88,000
Bal.
107,325
89,750
9,500
125,000
49,200
95,000
120,000
k.
– 3,600
Bal.
107,325
89,750
5,900
125,000
49,200
95,000
120,000
l.
–
12,000
– 12,000
Bal.
95,325
89,750
5,900
125,000
49,200
95,000
120,000
– 12,000
CHAPTER 1 Introduction to Accounting and Business
1–23
Prob. 1–5A (Continued)
Stockholders’ Equity (Continued)
+
Dry
Cleaning
Revenue
–
Dry
Cleaning
Exp.
–
Wages
Exp.
–
Rent
Exp.
–
Supplies
Exp.
–
Truck
Exp.
–
Utilities
Exp.
–
Misc.
Exp.
Bal.
a.
Bal.
b.
Bal.
c.
+ 32,125
Bal.
32,125
d.
– 6,000
Bal.
32,125
– 6,000
e.
Bal.
32,125
– 6,000
f.
Bal.
32,125
– 6,000
g.
+ 84,750
Bal.
116,875
– 6,000
h.
– 29,500
Bal.
116,875
– 29,500
– 6,000
i.
– 7,500
– 2,500
– 1,300
– 2,700
Bal.
j.
116,875
– 29,500
– 7,500
– 6,000
– 2,500
– 1,300
– 2,700
Bal.
116,875
– 29,500
– 7,500
– 6,000
– 2,500
– 1,300
– 2,700
k.
– 3,600
Bal.
l.
116,875
– 29,500
– 7,500
– 6,000
– 3,600
– 2,500
– 1,300
– 2,700
Bal.
116,875
– 29,500
– 7,500
– 6,000
– 3,600
– 2,500
– 1,300
– 2,700
CHAPTER 1 Introduction to Accounting and Business
1–24
Prob. 1–5A (Continued)
3.
D’Lite Dry Cleaners
Income Statement
For the Month Ended July 31, 20Y4
Dry cleaning revenue
$116,875
Expenses:
Dry cleaning expense
$29,500
Wages expense
7,500
Rent expense
6,000
Supplies expense
3,600
Truck expense
2,500
Utilities expense
1,300
Miscellaneous expense
2,700
Total expenses
(53,100)
Net income
$ 63,775
D’Lite Dry Cleaners
Statement of Stockholders’ Equity
For the Month Ended July 31, 20Y4
Common
Stock
Retained
Earnings
Total
Balances, July 1, 20Y4
$60,000
$120,000
$180,000
Issued common stock
35,000
35,000
Net income
63,775
63,775
Dividends
(12,000)
(12,000)
Balances, July 31, 20Y4
$95,000
$171,775
$266,775
D’Lite Dry Cleaners
Balance Sheet
July 31, 20Y4
Assets
Cash
$ 95,325
Accounts receivable
89,750
Supplies
5,900
Land
125,000
Total assets
$315,975
Liabilities
Accounts payable
$ 49,200
Stockholders’ Equity
Common stock
$ 95,000
Retained earnings
171,775
Total stockholders’ equity
266,775
Total liabilities and stockholders’ equity
$315,975
CHAPTER 1 Introduction to Accounting and Business
1–25
Prob. 1–5A (Concluded)
4. (Optional)
D’Lite Dry Cleaners
Statement of Cash Flows
For the Month Ended July 31, 20Y4
Cash flows from (used for) operating activities:
Cash received from customers*
$120,125
Cash paid for expenses
and to creditors**
(42,800)
Net cash flows from operating activities
$ 77,325
Cash flows from (used for) investing activities:
Cash paid for acquisition of land
(50,000)
Cash flows from (used for) financing activities:
Cash received from issuing common stock
$ 35,000
Cash paid for dividends
(12,000)
Net cash flows from financing activities
23,000
Net increase in cash
$ 50,325
Cash balance, July 1, 20Y4
45,000
Cash balance, July 31, 20Y4
$ 95,325
CHAPTER 1 Introduction to Accounting and Business
1–26
Prob. 1–6A
a. Fees earned, $750,000 ($275,000 + $475,000)
b. Supplies expense, $30,000 ($475,000 – $300,000 – $100,000 – $20,000 – $25,000)
CHAPTER 1 Introduction to Accounting and Business
1–27
Prob. 1–1B
1.
Assets
=
Liabilities +
Stockholders’ Equity
Cash
+
Accts.
Rec.
+
Supplies
=
Accts.
Payable
+
Common
Stock
–
Dividends
+
Fees
Earned
–
Rent
Expense
–
Salaries
Expense
–
Supplies
Expense
–
Auto
Exp.
–
Misc.
Exp.
a.
b.
+ 50,000
+ 4,000
+ 4,000
+ 50,000
Bal.
c.
50,000
– 2,300
4,000
4,000
– 2,300
50,000
Bal.
d.
47,700
+ 13,800
4,000
1,700
50,000
+ 13,800
Bal.
e.
61,500
– 5,000
4,000
1,700
50,000
13,800
– 5,000
Bal.
f.
56,500
– 1,450
4,000
1,700
50,000
13,800
– 5,000
– 1,150
– 300
Bal.
g.
55,050
– 2,500
4,000
1,700
50,000
13,800
– 5,000
– 2,500
– 1,150
– 300
Bal.
h.
52,550
4,000
– 1,300
1,700
50,000
13,800
– 5,000
– 2,500
– 1,300
– 1,150
– 300
Bal.
i.
52,550
+ 12,500
2,700
1,700
50,000
13,800
+ 12,500
– 5,000
– 2,500
– 1,300
– 1,150
– 300
Bal.
j
52,550
– 3,900
12,500
2,700
1,700
50,000
– 3,900
26,300
– 5,000
– 2,500
– 1,300
– 1,150
– 300
Bal.
48,650
12,500
2,700
1,700
50,000
– 3,900
26,300
– 5,000
– 2,500
– 1,300
– 1,150
– 300
2. Stockholders’ equity is the right of stockholders (owners) to the assets of the business. These rights are increased by
issuing common stock and revenues and decreased by dividends and expenses.
CHAPTER 1 Introduction to Accounting and Business
1–28
Prob. 1–2B
1.
Wilderness Travel Service
Income Statement
For the Year Ended April 30, 20Y7
Fees earned
$ 875,000
Expenses:
Wages expense
$525,000
Rent expense
75,000
Utilities expense
38,000
Supplies expense
12,000
Taxes expense
10,000
Miscellaneous expense
15,000
Total expenses
(675,000)
Net income
$ 200,000
2.
Wilderness Travel Service
Statement of Stockholders’ Equity
For the Year Ended April 30, 20Y7
Common
Stock
Retained
Earnings
Total
Balances, May 1, 20Y6
$25,000
$155,000
$180,000
Issued common stock
10,000
10,000
Net income
200,000
200,000
Dividends
(40,000)
(40,000)
Balances, April 30, 20Y7
$35,000
$315,000
$350,000
3.
Wilderness Travel Service
Balance Sheet
April 30, 20Y7
Assets
Cash
$156,000
Accounts receivable
210,000
Supplies
9,000
Total assets
$375,000
Liabilities
Accounts payable
$ 25,000
Stockholders’ Equity
Common stock
$ 35,000
Retained earnings
315,000
Total stockholders’ equity
350,000
Total liabilities and stockholders’ equity
$375,000
4. Net income (or net loss) appears on both the income statement and the statement of
CHAPTER 1 Introduction to Accounting and Business
1–29
Prob. 1–3B
1.
Bronco Consulting
Income Statement
For the Month Ended August 31, 20Y1
Fees earned
$ 125,000
Expenses:
Salaries expense
$58,000
Rent expense
27,000
Auto expense
15,500
Supplies expense
6,100
Miscellaneous expense
7,500
Total expenses
(114,100)
Net income
$ 10,900
2.
Bronco Consulting
Statement of Stockholders’ Equity
For the Month Ended August 31, 20Y1
Common
Stock
Retained
Earnings
Total
Balances, August 1, 20Y1
$ 0
$ 0
$ 0
Issued common stock
75,000
75,000
Net income
10,900
10,900
Dividends
(5,000)
(5,000)
Balances, August 31, 20Y1
$ 75,000
$ 5,900
$80,900
3.
Bronco Consulting
Balance Sheet
August 31, 20Y1
Assets
Cash
$48,000
Accounts receivable
33,000
Supplies
2,900
Total assets
$83,900
Liabilities
Accounts payable
$ 3,000
Stockholders’ Equity
Common stock
$75,000
Retained earnings
5,900
Total stockholders’ equity
80,900
Total liabilities and stockholders’ equity
$83,900
CHAPTER 1 Introduction to Accounting and Business
1–30
Prob. 1–3B (Concluded)
4. (Optional)
Bronco Consulting
Statement of Cash Flows
For the Month Ended August 31, 20Y1
Cash flows from (used for) operating activities:
Cash received from customers
$ 92,000
Cash paid for expenses
and to creditors*
(114,000)
Net cash flows used for operating activities
$(22,000)
Cash flows from (used for) investing activities
0
Cash flows from (used for) financing activities:
Cash received from issuing common stock
$ 75,000
Cash paid for dividends
(5,000)
Net cash flows from financing activities
70,000
Net increase in cash
$ 48,000
Cash balance, August 1, 20Y1
0
Cash balance, August 31, 20Y1
$ 48,000
* $27,000 + $6,000 + $23,000 + $58,000; these amounts are taken from the Cash column shown in
the problem.
CHAPTER 1 Introduction to Accounting and Business
1–31
Prob. 1–4B
1.
Assets
=
Liabilities +
Stockholders’ Equity
Cash
+
Supplies
=
Accts.
Payable
+
Common
Stock
–
Dividends
+
Sales
Comm.
–
Rent
Exp.
–
Salaries
Exp.
–
Auto
Exp.
–
Supplies
Exp.
–
Misc.
Exp.
a.
b.
+ 24,000
– 3,600
+ 24,000
– 3,600
Bal.
c.
20,400
– 1,950
24,000
– 3,600
– 1,350
– 600
Bal.
d.
18,450
+ 1,200
+ 1,200
24,000
– 3,600
– 1,350
– 600
Bal.
e.
18,450
+ 19,800
1,200
1,200
24,000
+ 19,800
– 3,600
– 1,350
– 600
Bal.
f.
38,250
– 750
1,200
1,200
– 750
24,000
19,800
– 3,600
– 1,350
– 600
Bal.
g.
37,500
– 2,500
1,200
450
24,000
19,800
– 3,600
– 2,500
– 1,350
– 600
Bal.
h.
35,500
– 3,500
1,200
450
24,000
– 3,500
19,800
– 3,600
– 2,500
– 1,350
– 600
Bal.
i.
31,500
1,200
– 900
450
24,000
– 3,500
19,800
– 3,600
– 2,500
– 1,350
– 900
– 600
Bal.
31,500
300
450
24,000
– 3,500
19,800
– 3,600
– 2,500
– 1,350
– 900
– 600
CHAPTER 1 Introduction to Accounting and Business
1–32
Prob. 1–4B (Concluded)
2.
Custom Realty
Income Statement
For the Month Ended April 30, 20Y8
Sales commissions
$19,800
Expenses:
Rent expense
$3,600
Salaries expense
2,500
Automobile expense
1,350
Supplies expense
900
Miscellaneous expense
600
Total expenses
(8,950)
Net income
$10,850
Custom Realty
Statement of Stockholders’ Equity
For the Month Ended April 30, 20Y8
Common
Stock
Retained
Earnings
Total
Balances, April 1, 20Y8
$ 0
$ 0
$ 0
Issued common stock
24,000
24,000
Net income
10,850
10,850
Dividends
(3,500)
(3,500)
Balances, April 30, 20Y8
$24,000
$ 7,350
$31,350
Custom Realty
Balance Sheet
April 30, 20Y8
Assets
Cash
$31,500
Supplies
300
Total assets
$31,800
Liabilities
Accounts payable
$ 450
Stockholders’ Equity
Common stock
$24,000
Retained earnings
7,350
Total stockholders’ equity
31,350
Total liabilities and stockholders’ equity
$31,800
CHAPTER 1 Introduction to Accounting and Business
1–33
Prob. 1–5B
1. Assets = Liabilities + Stockholders’ Equity
Cash
+
Accounts
Receivable
+
Supplies
+
Land
=
Accounts
Payable
+
Common
Stock
+
Retained
Earnings
$39,000
$80,000
+
$11,000
+
$50,000
=
$31,500
+
$50,000
+
Retained
Earnings
$180,000
=
$81,500
+
Retained Earnings
$98,500
=
Retained Earnings
CHAPTER 1 Introduction to Accounting and Business
1–34
Prob. 1–5B (Continued)
2.
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
+
Accts.
Rec.
+
Supplies
+
Land
=
Accts.
Payable
+
Common
Stock
+
Retained
Earnings
–
Dividends
Bal. a.
39,000
+ 21,000
80,000
11,000
50,000
31,500
50,000
+ 21,000
98,500
Bal.
60,000
80,000
11,000
50,000
31,500
71,000
98,500
b.
– 35,000
+ 35,000
Bal.
25,000
80,000
11,000
85,000
31,500
71,000
98,500
c.
– 4,000
Bal.
21,000
80,000
11,000
85,000
31,500
71,000
98,500
d.
+ 72,000
Bal.
21,000
152,000
11,000
85,000
31,500
71,000
98,500
e.
– 20,000
– 20,000
Bal.
1,000
152,000
11,000
85,000
11,500
71,000
98,500
f.
+ 8,000
+ 8,000
Bal.
1,000
152,000
19,000
85,000
19,500
71,000
98,500
g.
+ 38,000
Bal.
39,000
152,000
19,000
85,000
19,500
71,000
98,500
h.
+ 77,000
– 77,000
Bal.
116,000
75,000
19,000
85,000
19,500
71,000
98,500
i.
+ 29,450
Bal.
116,000
75,000
19,000
85,000
48,950
71,000
98,500
j.
– 29,200
Bal.
86,800
75,000
19,000
85,000
48,950
71,000
98,500
k.
– 7,200
Bal.
86,800
75,000
11,800
85,000
48,950
71,000
98,500
l.
– 5,000
– 5,000
Bal.
81,800
75,000
11,800
85,000
48,950
71,000
98,500
– 5,000
CHAPTER 1 Introduction to Accounting and Business
1–35
Prob. 1–5B (Continued)
Stockholders’ Equity (Continued)
+
Dry
Cleaning
Revenue
–
Dry
Cleaning
Exp.
–
Wages
Exp.
–
Supplies
Exp.
–
Rent Exp.
–
Truck Exp.
–
Utilities
Exp.
–
Misc.
Exp.
Bal.
a.
Bal.
b.
Bal.
c.
– 4,000
Bal.
d.
+ 72,000
– 4,000
Bal.
e.
72,000
– 4,000
Bal.
f.
72,000
– 4,000
Bal.
g.
72,000
+ 38,000
– 4,000
Bal.
h.
+ 110,000
– 4,000
Bal.
i.
110,000
– 29,450
– 4,000
Bal.
j.
110,000
– 29,450
– 24,000
– 4,000
– 2,100
– 1,800
– 1,300
Bal.
k.
110,000
– 29,450
– 24,000
– 7,200
– 4,000
– 2,100
– 1,800
– 1,300
Bal.
l.
110,000
– 29,450
– 24,000
– 7,200
– 4,000
– 2,100
– 1,800
– 1,300
Bal.
110,000
– 29,450
– 24,000
– 7,200
– 4,000
– 2,100
– 1,800
– 1,300