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21
Problem 1-2A (40 minutes)
Part 1
Company A
(a) Equity on December 31, 2016:
Part 2
Company B
(a) and (b)
Equity: 12/31/2016 12/31/2017
Assets ................................... $34,000 $40,000
(c) Net income for 2017:
Equity, December 31, 2016 ..................... $12,500
Problem 1-2A (Continued)
Part 3
Company C
First, compute the beginning balance of equity:
Dec. 31, 2016
Assets .......................................................... $24,000
Part 4
Company D
First, compute the beginning and ending equity balances:
12/31/2016 12/31/2017
Assets ...................................... $60,000 $85,000
Then, find the amount of investment by owner during 2017:
Equity, December 31, 2016 .......................... $20,000
Plus investment by owner ........................... ?
23
Problem 1-2A (Concluded)
Part 5
Company E
First, compute the balance of equity as of December 31, 2017:
Assets .......................................................... $113,000
Next, find the beginning balance of equity as follows:
Equity, December 31, 2016 ........................ $ ?
Problem 1-3A (20 minutes)
Armani Company
Income Statement
For Year Ended December 31, 2017
Revenues
Consulting revenue .............................. $33,000
24
Problem 1-4A (20 minutes)
Armani Company
Statement of Owner’s Equity
For Year Ended December 31, 2017
A. Armani, Capital, December 31, 2016 .......... $ 4,000
Problem 1-5A (20 minutes)
Armani Company
Balance Sheet
December 31, 2017
Assets Liabilities
Cash ............................... $10,000 Accounts payable ................. $23,000
Problem 1-6A (15 minutes)
Kia Company
Statement of Cash Flows
For Year Ended December 31, 2017
Cash from operating activities ........................ $ 6,000
25
Problem 1-7A (60 minutes) Part 1
Assets = Liabilities + Equity
Date
Cash
+
Accounts
Receivable
+
Office
Equipment
=
Accounts
Payable
+
G. Gram,
Capital
-
G. Gram,
With-
drawals
+
Revenues
-
Expenses
May
1
+$40,000
=
+
$40,000
1
- 2,200
=
-
$2,200
26
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 Owner’s Equity
For Month Ended May 31
G. Gram, Capital, May 1 ............................................ $ 0
The Gram Co.
Balance Sheet
May 31
Assets Liabilities
Cash ...............................$42,780 Accounts payable ........................ $ 80
27
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
28
Problem 1-8A (60 minutes) Part 1
Assets
=
Liabilities
+
Equity
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Office
Suite
=
Accounts
Payable
+
L. Lopez,
Capital
-
L. Lopez,
With-
drawals
+
Reve-
nues
-
Expen-
ses
a.
+$70,000
+
$10,000
+
$80,000
f.
+
$2,800
+
$2,800
Bal.
14,500
+
2,800
+
1,200
+
26,700
+
40,000
=
2,900
+
80,000
+
2,800
-
500
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 1
29
Problem 1-8A (Concluded)
Part 2
Problem 1-9A (60 minutes) Part 1
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Electrical
Equipment
=
Accounts
Payable
+
S. Sony,
Capital
-
S. Sony,
Withdrawals
+
Revenues
-
Expenses
8
+
$2,530
+ 2,530
Bal.
59,600
+
800
+
2,530
+
13,000
=
10,730
+
65,000
+
1,200
-
1,000
-
28
+ 5,000
-
5,000
Bal.
62,070
+
900
+
1,150
+
2,530
+
13,000
=
8,550
+
65,000
+
7,100
-
1,000
29
- 1,400
-
1,400
31
Problem 1-9A (Continued)
Part 2
Sony Electric
Income Statement
For Month Ended December 31
Revenues
Electrical fees earned ...................... $7,100
Expenses
Sony Electric
Statement of Owner’s Equity
For Month Ended December 31
S. Sony, Capital, December 1 .................... $ 0
Add: Investment by owner ..................... 65,000
Sony Electric
Balance Sheet
December 31
Assets Liabilities
Cash ................................. $59,180 Accounts payable .................... $ 8,550
32
Problem 1-9A (Concluded)
Part 3
Sony Electric
Statement of Cash Flows
For Month Ended December 31
Cash flows from operating activities
Cash flows from financing activities
Part 4
If the December 1 investment had been $49,000 cash instead of $65,000 and
33
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
revenues and net income numbers for Kyzera we obtain:
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
4. The reported figures suggest that Coca-Cola yields a marginally higher
34
Problem 1-12AA (5 minutes)
a. 3
Problem 1-13AB (15 minutes)
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, Chiappetta, FAP 23e Solutions Manual: Chapter 1
35
PROBLEM SET B
Problem 1-1B (25 minutes)
a.
b.
Balance Sheet
Income
Statement
Statement of Cash Flows
–400
4
Provide services
for $900 cash
+900
+900
+900
+900
5
Pays $400 cash
for rent incurred
–400
–400
–400
–400
36
Problem 1-2B (40 minutes)
Part 1
Company V
(a) and (b)
Calculation of equity: 12/31/2016 12/31/2017
Assets .............................
$54,000
$59,000
(c) Calculation of net income for 2017:
Equity, December 31, 2016 ........................ $29,000
Plus investments by owner ....................... 5,000
Part 2
Company W
(a) Calculation of equity at December 31, 2016:
Assets .......................................................... $80,000
37
Problem 1-2B (Continued)
Part 3
Company X
First, compute the beginning and ending equity balances:
12/31/2016 12/31/2017
Assets .............................
$141,500
$186,500
Part 4
Company Y
First, compute the beginning balance of equity:
Dec. 31, 2016
Assets .......................................................... $92,500
38
Problem 1-2B (Concluded)
Part 5
Company Z
First, compute the balance of equity as of December 31, 2017:
Assets .......................................................... $170,000
Next, find the beginning balance of equity as follows:
Equity, December 31, 2016 ........................ $ ?
Thus, the beginning balance of equity is $44,000.
Problem 1-3B (20 minutes)
Audi Company
Income Statement
For Year Ended December 31, 2017
Revenues
Consulting revenue .............................. $6,600
39
Problem 1-4B (20 minutes)
Audi Company
Statement of Owner’s Equity
For Year Ended December 31, 2017
A. Audi, Capital, December 31, 2016 .............. $ 800
Problem 1-5B (20 minutes)
Audi Company
Balance Sheet
December 31, 2017
Assets Liabilities
Cash ............................... $2,000 Accounts payable ................. $4,600
Problem 1-6B (15 minutes)
Banji Company
Statement of Cash Flows
For Year Ended December 31, 2017
Cash used by operating activities ...................... $(3,000)
Cash from investing activities ............................. 1,600
