Wild & Shaw, Financial and Managerial Accounting 9e 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
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
4
Buys $100 of
equipment on
+100
+100
5
Purchases $200
supplies on
credit
+200
+200
6
Buys equipment
for $300 cash
+300
–300
–300
7
Pays $200 on
accounts
payable
Collects $400
cash on account
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-2A (40 minutes)
Part 1
Company A
(a) Equity at beginning of year:
Assets …………………………………………………. $55,000
Liabilities …………………………………………….. (24,500)
Equity …………………………………………………. $30,500
(b) Equity at end of year:
Part 2
Company B
(a) and (b)
Equity: Beginning Ending
Assets …………………………….. $34,000 $40,000
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-2A (Continued)
Part 3
Company C
First, compute the beginning balance of equity:
Beginning of Year
Assets …………………………………………………. $24,000
Liabilities …………………………………………….. ( 9,000)
Equity …………………………………………………. $15,000
Part 4
Company D
First, compute the beginning and ending equity balances:
Beginning Ending
Assets ……………………………….. $60,000 $85,000
Then, find the amount of stock issuances during the year:
Equity, beginning of year ………………………. $20,000
Problem 1-2A (Concluded)
Part 5
Company E
First, compute the balance of equity at end of year:
Assets …………………………………………………. $113,000
Finally, find the beginning amount of liabilities by subtracting the
beginning balance of equity from the beginning balance of assets:
Beginning of Year
Problem 1-3A (20 minutes)
Armani Company
Income Statement
For Current Year Ended December 31
Revenues
Consulting revenue ………………………… $33,000
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-4A (20 minutes)
Armani Company
Statement of Retained Earnings
For Current Year Ended December 31
Retained earnings, Dec. 31, prior year ……….. $ 3,000
Problem 1-5A (20 minutes)
Armani Company
Balance Sheet
December 31
Assets Liabilities
Cash …………………………. $10,000 Accounts payable …………….. $11,000
Problem 1-6A (15 minutes)
Kia Company
Statement of Cash Flows
For Current Year Ended December 31
Cash from operating activities …………………… $ 6,000
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-7A (60 minutes) Part 1
Assets = Liabilities + Equity
Date
Cash
+
Accounts
Receivable
+
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
=
27
+
80
=
+ 80
28
– 750
=
–
750 Salary
30
– 280
=
–
31
– 1,400
=
$42,780
+
+
=
+
Wild & Shaw, Financial and Managerial Accounting 9e 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
Expenses
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 and Managerial Accounting 9e 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 ………………………………………………
Cash paid for cleaning ……………………………………….
Cash paid for telephone ……………………………………..
Cash paid for utilities …………………………………………
Cash paid to employees …………………………………….
(1,500)
Net cash provided by operating activities …………..
Cash flows from investing activities
Cash paid for equipment ……………………………………
(1,890)
Net cash used by investing activities ………………….
(1,890)
Cash flows from financing activities
Cash investment from shareholder …………………….
Cash dividend to shareholder …………………………….
(1,400)
Net cash provided by financing activities ……………
Net increase in cash …………………………………………..
Cash balance, May 1 ………………………………………….
Cash balance, May 31 ………………………………………..
$42,780
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-8A (60 minutes) Part 1
Assets
=
Liabilities
+
Equity
Cash
+
Accounts
Receivable
+
Supplies
+
Equipment
+
Building
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Revenues
–
Expenses
a.
+$70,000
+
$10,000
+
$80,000
b.
– 40,000
+
$40,000
Bal.
30,000
+
10,000
+
40,000
=
+
80,000
+
15,000
Bal.
15,000
+
25,000
+
40,000
=
+
80,000
d.
+
+
– 500
$ 500
Bal.
14,500
+
1,200
+
26,700
+
40,000
=
2,900
+
80,000
–
500
+
$2,800
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
–
1,800
Bal.
17,025
+
1,000
+
1,200
+
26,700
+
40,000
=
2,900
+
80,000
–
3,275
+
6,800
–
500
Bal.
16,325
+
1,000
+
1,200
+
26,700
+
40,000
=
2,200
+
80,000
–
3,275
+
6,800
–
500
1,800
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-8A (Concluded)
Part 2
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-9A (60 minutes) Part 1
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
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.
Problem 1-9A (Continued)
Part 2
Sony Electric
Income Statement
For Month Ended December 31
Revenues
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
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
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 ……………………………………….
Cash paid to employees ……………………………………..
Cash flows from investing activities
Cash paid for electrical equipment ……………………..
Cash flows from financing activities
Cash investment from shareholder …………………….
65,000
Cash dividend to shareholder …………………………….
(950)
Net cash provided by financing activities ……………
64,050
Net increase in cash …………………………………………..
Cash balance, Dec. 1 ………………………………………….
0
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:
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-10A (15 minutes)
1. Return on assets is net income divided by the average total assets.
2. Return on assets seems satisfactory for the risk involved in the
3. We know that revenues less expenses equal net income. Taking the
4. We know from the accounting equation that total financing (liabilities
Problem 1-11A (20 minutes)
1. Return on assets equals net income divided by average total assets.
2. Strictly on the amount of sales to consumers, Coca–Cola’s sales of
3. Success in returning net income from the average amount invested is
Wild & Shaw, Financial and Managerial Accounting 9e 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
credit
+100
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
7
Pays $300 cash
for wages
incurred
–300
–300
–300
–300
8
Pays $50 cash in
9
Provide $600 of
services on
cash on
accounts
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-2B (40 minutes)
Part 1
Company V
(a) and (b)
Calculation of equity: Beginning Ending
(c) Calculation of net income for the year:
Equity, beginning of year …………………….. $29,000
Part 2
Company W
(a) Calculation of equity at beginning of year:
Assets …………………………………………………. $80,000
Liabilities …………………………………………….. (60,000)
Equity …………………………………………………. $20,000
(b) Calculation of equity at end of year:
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-2B (Continued)
Part 3
Company X
First, compute the beginning and ending equity balances:
Beginning Ending
Part 4
Company Y
First, compute the beginning balance of equity:
Beginning
Assets …………………………………………………. $92,500
Liabilities …………………………………………….. 51,500
Equity …………………………………………………. $41,000
Next, find the ending balance of equity as follows:
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-2B (Concluded)
Part 5
Company Z
First, compute the balance of equity at end of year:
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:
Beginning
Problem 1-3B (20 minutes)
Audi Company
Income Statement
For Current Year Ended December 31
Revenues
Consulting revenue ………………………… $6,600
Wild & Shaw, Financial and Managerial Accounting 9e Solutions Manual: Chapter 1
Problem 1-4B (20 minutes)
Audi Company
Statement of Retained Earnings
For Current Year Ended December 31
Retained earnings, Dec. 31, prior year ……….. $ 900
Problem 1-5B (20 minutes)
Audi Company
Balance Sheet
December 31
Assets Liabilities
Cash …………………………. $2,000 Accounts payable …………….. $3,600
Problem 1-6B (15 minutes)
Banji Company
Statement of Cash Flows
For Current Year Ended December 31
Cash used by operating activities …………………. $(3,000)