Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
CHAPTER 1
SOLUTIONS TO EXERCISES—SET B
EXERCISE 1-1B
R Summarizing economic events.
I Selecting economic activities relevant to the company.
C Reporting information in a standard format.
C Preparing accounting reports.
EXERCISE 1-2B
(a) Internal users
Factory manager
External users
Customers
Internal Revenue Service
Labor unions
Securities and Exchange Commission
Suppliers
Investors
(b) I What price should we set for our product?
E Did the company earn a satisfactory income?
EXERCISE 1-3B
Rick Payne, president of Lions Company, instructed Ken Mason, the head
of the accounting department, to report the company’s land in their accounting
reports at its fair value of $225,000 instead of its cost of $125,000, in an
effort to make the company appear to be a better investment. The historical
cost principle requires that assets be recorded and reported at their cost,
because cost is reliable and can be objectively measured and verified.
The stakeholders include stockholders and creditors of Lions Company,
potential stockholders and creditors, other users of Lions’ accounting reports,
Rick Payne, and Ken Mason. All users of Lions’ accounting reports could be
EXERCISE 1-4B
1. Incorrect. The historical cost principle requires that assets be recorded
and reported at their cost.
2. Correct. The monetary unit assumption requires that companies include
in the accounting records only transaction data that can be expressed
in terms of money.
EXERCISE 1-5B
Asset
Liability
Owner’s Equity
Cash
Accounts payable
Owner’s capital
Equipment
Notes payable
Supplies
Rent payable
Accounts receivable
EXERCISE 1-6B
1. Increase in assets and increase in owner’s equity.
2. Increase in assets and increase in liabilities.
3. Decrease in assets and decrease in owner’s equity.
4. Increase in assets and increase in owner’s equity.
EXERCISE 1-7B
1. (c) 5. (d)
EXERCISE 1-8B
(a) 1. Owner invested $20,000 cash in the business.
2. Purchased equipment for $5,000, paying $2,000 in cash and the
EXERCISE 1-8B (Continued)
6. Owner withdrew $2,000 cash for personal use.
7. Paid $820 cash for rent.
(b) Investment ............................................................................... $20,000
Service revenue ...................................................................... 8,300
Drawings ................................................................................. (2,000)
Rent expense .......................................................................... (820)
(c) Service revenue ...................................................................... $8,300
Rent expense .......................................................................... (820)
EXERCISE 1-9B
HOLMES & CO.
Income Statement
For the Month Ended August 31, 2017
Revenues
Service revenue ......................................................... $8,300
Expenses
Salaries and wages expense .................................... $5,400
EXERCISE 1-9B (Continued)
HOLMES & CO.
Owner’s Equity Statement
For the Month Ended August 31, 2017
Owner’s Capital, August 1 ........................................... $ 0
Add: Investments ....................................................... $20,000
Net income ........................................................ 1,580 21,580
HOLMES & CO.
Balance Sheet
August 31, 2017
Assets
Cash .................................................................................. $13,580
Accounts receivable ........................................................ 2,250
Liabilities and Owner’s Equity
Liabilities
Accounts payable ..................................................... $ 2,000
EXERCISE 1-10B
(a) Owner’s equity—12/31/16 ($390,000 – $240,000) ................. $150,000
Owner’s equity—1/1/16 ......................................................... 100,000
EXERCISE 1-10B (Continued)
(b) Owner’s equity—12/31/17 ($460,000 – $280,000) ............... $180,000
Owner’s equity—1/1/17—see (a) ......................................... 150,000
Increase in owner’s equity .................................................. 30,000
(c) Owner’s equity—12/31/18 ($590,000 – $360,000) ............... $230,000
Owner’s equity—1/1/18—see (b) ......................................... 180,000
Increase in owner’s equity .................................................. 50,000
EXERCISE 1-11B
(a) Total assets (beginning of year) ....................... $115,000
Total liabilities (beginning of year) ................... 90,000
Total owner’s equity (beginning of year) ......... $ 25,000
(b) Total owner’s equity (end of year) .................... $ 60,000
Total owner’s equity (beginning of year) ......... 25,000
Increase in owner’s equity ................................ $ 35,000
Increase in owner’s equity ................................ $ 35,000
Less: Net income .............................................. $(40,000)
(c) Total assets (beginning of year) ....................... $129,000
EXERCISE 1-11B (Continued)
(d) Total owner’s equity (end of year) .................. $130,000
Total owner’s equity (beginning of year) ....... 78,000
Increase in owner’s equity .............................. $ 52,000
EXERCISE 1-12B
EUSEY CO.
Income Statement
For the Year Ended December 31, 2017
Revenues
Service revenue .................................................... $65,000
Expenses
Salaries and wages expense ............................... $30,000
EUSEY CO.
Owner’s Equity Statement
For the Year Ended December 31, 2017
Owner’s Capital, January 1 ............................................................. $48,000
EXERCISE 1-13B
NYMEYER COMPANY
Balance Sheet
December 31, 2017
Assets
Cash ................................................................................. $11,000
Accounts receivable ....................................................... 10,500
Liabilities and Owner’s Equity
Liabilities
Accounts payable .................................................... $18,000
Owner’s equity
EXERCISE 1-14B
(a) Camping fee revenues ............................................ $120,000
(b) WILDERNESS PARK
Balance Sheet
December 31, 2017
Assets
Cash .......................................................................... $ 11,000
EXERCISE 1-14B (Continued)
WILDERNESS PARK
Balance Sheet (Continued)
December 31, 2017
Liabilities and Owner’s Equity
Liabilities
Notes payable ...................................................... $ 50,000
Accounts payable ............................................... 12,000
EXERCISE 1-15B WILLIAMSON COMPANY
Income Statement
For the Year Ended December 31, 2017
Revenues
Ticket revenue .................................................. $370,000
Expenses
Salaries and wages expense ........................... $150,000
EXERCISE 1-16B
JEFF TABOR, ATTORNEY
Owner’s Equity Statement
For the Year Ended December 31, 2017
Owner’s Capital, January 1 .................................................... $ 42,000 (a)
Add: Net income .................................................................. 119,000 (b)
EXERCISE 1-16B (Continued)
Supporting Computations
(a) Assets, January 1, 2017 ........................................................ $105,000
Liabilities, January 1, 2017 .................................................... 63,000
Capital, January 1, 2017 ........................................................ $ 42,000
PROBLEM 1-1C (Continued)
(b) Service revenue ...................................................... $9,500
Expenses
Salaries and wages ......................................... $2,200
PROBLEM 1-2C
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Exercise B/Problem Set C (For Instructor Use Only) 1-13
3.
8.
2,700
+3,000
$3,300
+
+
100
+6,000
$6,100
+
+
500
0000
$500
+
+
5,000
00,000
$6,000
=
=
+$3,000
+
1,500
00,000
+450
$2,550
+
+
6,800
–450
$6,800
–
$750
+
+$9,000
$9,000
–
–450
$4,700
PROBLEM 1-2C (Continued)
(b) NANCY GRIMWOOD, ATTORNEY AT LAW
Income Statement
For the Month Ended August 31, 2017
Revenues
Service revenue............................................. $9,000
Expenses
Salaries and wages expense ........................ $3,000
NANCY GRIMWOOD, ATTORNEY AT LAW
Owner’s Equity Statement
For the Month Ended August 31, 2017
Owner’s Capital, August 1 ..................................................... $ 6,800
Add: Net income ................................................................... 4,300
PROBLEM 1-2C (Continued)
ANGIE CRAWFORD, ATTORNEY AT LAW
Balance Sheet
August 31, 2017
Assets
Cash ........................................................................ $ 3,300
Liabilities and Owner’s Equity
Liabilities
Notes payable .................................................. $ 3,000
Accounts payable ........................................... 2,550
Total liabilities.......................................... $ 5,550
PROBLEM 1-3C
(a) PLUSH COSMETICS CO.
Income Statement
For the Month Ended June 30, 2017
Revenues
Service revenue............................................ $6,000
Expenses
Supplies expense ......................................... $1,600
PLUSH COSMETICS CO.
Owner’s Equity Statement
For the Month Ended June 30, 2017
Owner’s Capital, June 1 ...................................... $ 0
Add: Investments .............................................. $26,200
PLUSH COSMETICS CO.
Balance Sheet
June 30, 2017
Assets
Cash ..................................................................... $11,000
Accounts receivable ........................................... 4,000
PROBLEM 1-3C (Continued)
PLUSH COSMETICS CO.
Balance Sheet (Continued)
June 30, 2017
Liabilities and Owner’s Equity
Liabilities
Notes payable .................................................. $13,000
Accounts payable ........................................... 1,200
(b) PLUSH COSMETICS CO.
Income Statement
For the Month Ended June 30, 2017
Revenues
Service revenue ($6,000 + $800) ................. $6,800
Expenses
Supplies expense ......................................... $1,600
Gasoline expense ($800 + $100) ................. 900
PLUSH COSMETICS CO.
Owner’s Equity Statement
For the Month Ended June 30, 2017
Owner’s Capital, June 1 ...................................... $ 0
Add: Investments .............................................. $26,200
PROBLEM 1-4C
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Exercise B/Problem Set C (For Instructor Use Only) 1-18
Assets
=
Liabilities
+
Owner’s Equity
Date
Cash
+
Accounts
Receivable
+
Supplies
+
Equipment
=
Notes
Payable
+
Accounts
Payable
+
Owner’s
Capital
–
Owner’s
Drawings
+
Revenues
–
Expenses
May 1
2
3
($ 8,000)
(800)
$500
($ 500)
$8,000)
($ 800)
PROBLEM 1-4C (Continued)
(b) JENNER CONSULTING
Income Statement
For the Month Ended May 31, 2017
Revenues
Service revenue............................................. $7,300
Expenses
Salaries and wages expense ........................ $3,000
Rent expense ................................................. 800
(c) JENNER CONSULTING
Balance Sheet
May 31, 2017
Assets
Cash ....................................................................... $13,800
Accounts receivable ............................................. 1,300
Liabilities and Owner’s Equity
Liabilities
Notes payable ................................................ $ 5,000
PROBLEM 1-5C
(a)
Harpo
Company
Curly
Company
Groucho
Company
Moe
Company
(a)
$30,000
(d)
$40,000
(g)
$124,000
(j)
$ 50,000
(b) HARPO COMPANY
Owner’s Equity Statement
For the Year Ended December 31, 2017
Owner’s Capital, January 1 ................................. $30,000
Add: Investment ................................................ $ 5,000
Net income ................................................ 15,000 20,000
(c) The sequence of preparing financial statements is income statement,
owner’s equity statement, and balance sheet. The interrelationship of
the owner’s equity statement to the other financial statements results
