Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Exercise 1-23 (concluded)
b. Using the accounting equation on March 1:
Assets
=
Liabilities
+
Equity
=
$30,000
+
?
Assets
=
Liabilities
+
Equity
=
$30,000
+
?
$85,000
=
$30,000
+
?
c. Using the accounting equation on August 1:
Assets
=
Liabilities
+
Equity
$30,000
=
$10,000
+
?
Assets
=
Liabilities
+
Equity
=
$10,000
+
?
$40,000
=
$10,000
+
?
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
PROBLEM SET A
Problem 1-1A (25 minutes)
a.
b.
Balance Sheet
Income
Statement
Statement of Cash Flows
Transaction
Total
Assets
Total
Liab.
Total
Equity
Net
Income
Operating
Activities
Investing
Activities
Financing
Activities
1
Owner invests
$900 cash in
business in
exchange for
stock
+900
+900
+900
cash for
services
provided
3
Pays $500 cash
wages
5
Purchases $200
supplies on
credit
6
Buys equipment
for $300 cash
+300
–300
–300
7
Pays $200 on
accounts
payable
–200
–200
–200
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-2A (40 minutes)
Part 1
Company A
(a) Equity on December 31, 2018:
Assets …………………………………………………. $55,000
Liabilities …………………………………………….. (24,500)
Equity …………………………………………………. $30,500
Part 2
Company B
(a) and (b)
Equity: 12/31/2018 12/31/2019
Assets …………………………….. $34,000 $40,000
Liabilities ………………………… (21,500) (26,500)
Equity …………………………….. $12,500 $13,500
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-2A (Continued)
Part 3
Company C
First, compute the beginning balance of equity:
Dec. 31, 2018
Next, find the ending balance of equity by completing this table:
Equity, December 31, 2018 …………………… $15,000
Finally, find the ending amount of assets by adding the ending balance of
equity to the ending balance of liabilities:
Dec. 31, 2019
Part 4
Company D
First, compute the beginning and ending equity balances:
12/31/2018 12/31/2019
Then, find the amount of stock issuances during 2019:
Equity, December 31, 2018 …………………….. $20,000
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-2A (Concluded)
Part 5
Company E
First, compute the balance of equity as of December 31, 2019:
Next, find the beginning balance of equity as follows:
Equity, December 31, 2018 …………………… $ ?
Finally, find the beginning amount of liabilities by subtracting the
beginning balance of equity from the beginning balance of assets:
Dec. 31, 2018
Problem 1-3A (20 minutes)
Armani Company
Income Statement
For Year Ended December 31, 2019
Revenues
Consulting revenue ………………………… $33,000
Rental revenue ……………………………….. 22,000
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-4A (20 minutes)
Armani Company
Statement of Retained Earnings
For Year Ended December 31, 2019
Retained earnings, December 31, 2018 ………. $ 3,000
Problem 1-5A (20 minutes)
Armani Company
Balance Sheet
December 31, 2019
Assets Liabilities
Problem 1-6A (15 minutes)
Kia Company
Statement of Cash Flows
For Year Ended December 31, 2019
Cash from operating activities …………………… $ 6,000
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-7A (60 minutes) Part 1
Assets = Liabilities + Equity
Date
Cash
+
Accounts
Receivable
+
Office
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Revenues
–
Expenses
May
1
+$40,000
=
+
$40,000
1
– 2,200
=
–
$2,200 Rent
3
+
$1,890
=
+ $1,890
5
– 750
=
–
8
=
+
12
+
=
+
15
– 750
=
–
20
+ 2,500
=
+
=
+
25
+ 3,200
=
26
– 1,890
=
– 1,890
27
+
80
=
+ 80
28
– 750
=
–
750 Salary
30
– 280
=
–
31
– 1,400
=
$42,780
+
+
=
+
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-7A (Continued)
Part 2
The Gram Co.
Income Statement
For Month Ended May 31
Revenues
Consulting services revenue ………… $11,100
The Gram Co.
Statement of Retained Earnings
For Month Ended May 31
Retained earnings, May 1 ………………………………….. $ 0
The Gram Co.
Balance Sheet
May 31
Assets Liabilities
Cash ………………………….$42,780 Accounts payable …………………… $ 80
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-7A (Concluded)
Part 3
The Gram Co.
Statement of Cash Flows
For Month Ended May 31
Cash flows from operating activities
Cash received from customers …………………………..
$11,100
Cash paid for rent ………………………………………………
(2,200)
Cash paid for cleaning ……………………………………….
Cash paid for telephone ……………………………………..
Cash paid for utilities …………………………………………
Cash paid to employees …………………………………….
Cash flows from investing activities
Cash paid for equipment ……………………………………
Cash flows from financing activities
Cash investment from shareholder …………………….
Cash dividend to shareholder …………………………….
Net cash provided by financing activities ……………
Net increase in cash …………………………………………..
Cash balance, May 1 ………………………………………….
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-8A (60 minutes) Part 1
Assets
=
Liabilities
+
Equity
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Office
Suite
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Reve-
nues
–
Expen-
ses
a.
+$70,000
+
$10,000
+
$80,000
b.
– 40,000
+
$40,000
Bal.
30,000
+
10,000
+
40,000
=
+
80,000
+
Bal.
15,000
+
25,000
+
40,000
=
+
80,000
d.
+
+
+ $2,900
Bal.
15,000
+
+
26,700
+
40,000
=
2,900
+
80,000
– 500
Bal.
14,500
+
1,200
+
26,700
+
40,000
=
2,900
+
80,000
–
500
f.
+
$2,800
+
$2,800
Bal.
14,500
+
2,800
+
1,200
+
26,700
+
40,000
=
2,900
+
80,000
+
2,800
–
500
g.
+ 4,000
+
4,000
Bal.
18,500
+
2,800
+
1,200
+
26,700
+
40,000
=
2,900
+
80,000
+
6,800
–
500
h.
– 3,275
–
$3,275
Bal.
15,225
+
2,800
+
1,200
+
26,700
+
40,000
=
2,900
+
80,000
3,275
+
6,800
–
500
+ 1,800
Bal.
17,025
+
1,000
+
1,200
+
26,700
+
40,000
=
2,900
+
80,000
3,275
+
6,800
–
500
Bal.
+
+
+
=
– 1,800
1,800
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-8A (Concluded)
Part 2
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-9A (60 minutes) Part 1
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Electrical
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Revenues
–
Expenses
Dec.
1
+$65,000
=
+
$65,000
2
– 1,000
–
$1,000
Bal.
64,000
=
65,000
–
1,000
3
– 4,800
+
$13,000
+ $8,200
–
5
– 800
+
$ 800
Bal.
58,400
+
+
13,000
=
+
65,000
–
1,000
6
+ 1,200
Bal.
59,600
+
+
13,000
=
8,200
+
65,000
+
1,200
–
1,000
8
+
$2,530
+ 2,530
Bal.
59,600
+
+
+
13,000
=
+
65,000
–
1,000
+
$5,000
Bal.
59,600
+
5,000
+
+
2,530
+
13,000
=
10,730
+
65,000
+
6,200
–
1,000
18
+
350
+ 350
Bal.
59,600
+
5,000
+
1,150
+
2,530
+
13,000
=
11,080
+
65,000
+
6,200
–
1,000
20
– 2,530
– 2,530
Bal.
57,070
+
5,000
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
6,200
–
1,000
24
+
900
+
900
Bal.
57,070
+
5,900
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
7,100
–
1,000
28
Bal.
62,070
+
900
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
7,100
–
1,000
29
– 1,400
–
1,400
Bal.
60,670
+
900
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
7,100
–
2,400
30
– 540
–
Bal.
60,130
+
900
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
7,100
–
2,940
31
– 950
Bal.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-9A (Continued)
Part 2
Sony Electric
Income Statement
For Month Ended December 31
Revenues
Electrical fees earned …………………. $7,100
Sony Electric
Statement of Retained Earnings
For Month Ended December 31
Retained earnings, December 1 ……………. $ 0
Sony Electric
Balance Sheet
December 31
Assets Liabilities
Cash …………………………... $59,180 Accounts payable ……………….. $ 8,550
Problem 1-9A (Concluded)
Part 3
Sony Electric
Statement of Cash Flows
For Month Ended December 31
Cash flows from operating activities
Cash received from customers1 …………………………...
$ 6,200
Cash paid for rent ………………………………………………..
(1,000)
Cash paid for supplies …………………………………………
(800)
Cash paid for utilities …………………………………………..
(540)
Cash paid to employees ……………………………………….
Net cash provided by operating activities ……………..
Cash flows from investing activities
Cash paid for office equipment …………………………….
(2,530)
Cash paid for electrical equipment ……………………….
Net cash used by investing activities ……………………
Cash flows from financing activities
Cash investment from shareholder ……………………….
65,000
Net cash provided by financing activities ……………..
Net increase in cash …………………………………………….
Cash balance, Dec. 1 ……………………………………………
Part 4
If the December 1 investment had been $49,000 cash instead of $65,000 and
the $16,000 difference was borrowed by the company from a bank, then:
(a) Total assets would remain the same.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-10A (15 minutes)
2. Return on assets seems satisfactory for the risk involved in the
manufacturing, marketing, and selling of cellular telephones.
equity (financing) must equal $250,000.
Problem 1-11A (20 minutes)
1. Return on assets equals net income divided by average total assets.
a. Coca-Cola return: $8,634 / $76,448 = 0.113 or 11.3%.
4. The reported figures suggest that Coca-Cola yields a marginally higher
return on assets than PepsiCo. Based on this information alone, we
would be better advised to invest in Coca-Cola than PepsiCo.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-12AA (5 minutes)
a. 3 Lowest-risk corporate bond.
Problem 1-13AB (15 minutes)
1.
F Shareholders investing in business.
5.
I Purchasing equipment.
2.
I Purchasing a building.
6.
O Selling and distributing products.
4.
F Borrowing cash from a bank.
8.
O Paying employee wages.
Problem 1-14AB (15 minutes)
An organization pursues three major business activities: financing,
investing, and operating.
(1) Financing is the means used to pay for resources.
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
PROBLEM SET B
Problem 1-1B (25 minutes)
a.
b.
Balance Sheet
Income
Statement
Statement of Cash Flows
Transaction
Total
Assets
Total
Liab.
Total
Equity
Net
Income
Operating
Activities
Investing
Activities
Financing
Activities
1
Owner invests
$800 cash in
business in
exchange for
stock
+800
+800
+800
2
Purchases $100
supplies on
credit
+100
–400
4
Provide services
for $900 cash
5
Pays $400 cash
for rent incurred
–400
–400
–400
–400
6
Buys $200 of
equipment on
credit
+200
+200
dividends
9
Provide $600
services on
cash on
receivable
Problem 1-2B (40 minutes)
Part 1
Company V
(a) and (b)
Calculation of equity: 12/31/2018 12/31/2019
Part 2
Company W
(a) Calculation of equity at December 31, 2018:
Assets …………………………………………………. $80,000
Liabilities …………………………………………….. (60,000)
Equity …………………………………………………. $20,000
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-2B (Continued)
Part 3
Company X
First, compute the beginning and ending equity balances:
12/31/2018 12/31/2019
Assets ………………………..
$141,500
$186,500
Liabilities ……………………
(68,500)
(65,800)
Part 4
Company Y
First, compute the beginning balance of equity:
Dec. 31, 2018
Assets …………………………………………………. $92,500
Liabilities …………………………………………….. 51,500
Equity …………………………………………………. $41,000
Next, find the ending balance of equity as follows:
Wild, Shaw, Financial & Managerial Accounting, 8e Solutions Manual: Chapter 1
Problem 1-2B (Concluded)
Part 5
Company Z
First, compute the balance of equity as of December 31, 2019:
Assets …………………………………………………. $170,000
Thus, the beginning balance of equity is $44,000.
Finally, find the beginning amount of liabilities by subtracting the
beginning balance of equity from the beginning balance of assets:
Dec. 31, 2018
Problem 1-3B (20 minutes)
Audi Company
Income Statement
For Year Ended December 31, 2019
Revenues
Consulting revenue ………………………… $6,600
Rental revenue ……………………………….. 4,400