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Problem 1-7B (60 minutes) Part 1
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Equipment
=
Accounts
Payable
+
N. Niko,
Capital
-
N. Niko,
Withdrawals
+
Revenues
-
Expenses
June
1
+$130,000
=
+
$130,000
25
+ 7,900
-
7,900
=
26
- 2,400
=
- 2,400
41
Problem 1-7B (Continued)
Part 2
Niko’s Maintenance Co.
Income Statement
For Month Ended June 30
Revenues
Maintenance services revenue .......... $16,925
Expenses
Rent expense ....................................... $6,000
Niko’s Maintenance Co.
Statement of Owner’s Equity
For Month Ended June 30
N. Niko, Capital, June 1 ..................................... $ 0
Niko’s Maintenance Co.
Balance Sheet
June 30
Assets
Liabilities
Cash ................................
$130,060
Accounts payable ..........................
$ 0
42
Problem 1-7B (Concluded)
Part 3
Niko’s Maintenance Co.
Statement of Cash Flows
For Month Ended June 30
Cash flows from operating activities
Cash received from customers1 .................................
$ 16,250
Cash paid for rent ........................................................
(6,000)
43
Problem 1-8B (60 minutes) Part 1
Assets
=
Liabilities
+
Equity
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Office
Suite
=
Accounts
Payable
+
N. Nadal,
Capital
-
N. Nadal,
Withdrawals
+
Reve-
nues
-
Expen-
ses
- 750
-
Bal.
14,250
+
1,200
+
36,700
+
50,000
=
2,900
+
100,000
-
750
f.
+
$2,800
+
$2,800
Bal.
14,250
+
2,800
+
1,200
+
36,700
+
50,000
=
2,900
+
100,000
+
2,800
-
750
44
Problem 1-8B (Concluded)
Part 2
Problem 1-9B (60 minutes) Part 1
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Roofing
Equipment
=
Accounts
Payable
+
R. Rivera,
Capital
-
R. Rivera,
Withdrawals
+
Revenues
-
Expenses
-
8
+ 7,600
+
$7,600
Bal.
85,300
+
600
+
5,000
=
4,000
+
80,000
+
7,600
-
700
10
+
$2,300
+ 2,300
Bal.
85,300
+
600
+
2,300
+
5,000
=
6,300
+
80,000
+
7,600
-
700
15
+
$8,200
+
8,200
-
30
- 1,560
-
1,560
Bal.
89,640
+
5,000
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
20,800
-
2,260
31
- 295
-
295
46
Problem 1-9B (Continued)
Part 2
Rivera Roofing Company
Income Statement
For Month Ended July 31
Revenues
Roofing fees earned .................................. $20,800
Expenses
Rivera Roofing Company
Statement of Owner’s Equity
For Month Ended July 31
R. Rivera, Capital, July 1 ............................ $ 0
Add: Investment by owner ...................... 80,000
Rivera Roofing Company
Balance Sheet
July 31
Assets Liabilities
Cash .................................... $ 87,545 Accounts payable .............. $ 7,100
47
Problem 1-9B (Concluded)
Part 3
Rivera Roofing Company
Statement of Cash Flows
For Month Ended July 31
Net cash used by investing activities ........................
(3,300)
Cash flows from financing activities
Investments by owner .................................................
80,000
Part 4
If the $5,000 purchase on July 3 had been acquired through an additional
Problem 1-10B (15 minutes)
2. Return on assets does not seem satisfactory for the risk involved in
3. We know that revenues less expenses equal net income. Taking the
4. We know from the accounting equation that the total of liabilities plus
equity (financing) must equal the total for assets (investing). Since
1. Return on assets equals net income divided by average total assets.
3. Success in returning net income from the amount invested is revealed
4. The reported figures suggest Verizon is more successful in generating
income based on assets. Based on this information alone, we would be
better advised to invest in Verizon than AT&T.
50
Problem 1-12BA (5 minutes)
a. 2
Problem 1-13BB (15 minutes)
51
Problem 1-14BB (15 minutes)
I. Financing Activities
II. Investing Activities
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 1
52
Serial Problem — SP 1 (30 minutes) Business Solutions
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Computer
Supplies
+
Computer
System
+
Office
Equipment
=
Accounts
Payable
+
S. Rey,
Capital
-
S. Rey,
Withdrawals
+
Revenues
-
Expenses
Oct.
1
+$45,000
$20,000
+
$8,000
+
$73,000
3
+
$1,420
+ $1,420
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 1
Reporting in Action — BTN 1-1
1. An organization’s total assets are equal to its total liabilities plus total
2. Return on assets is net income divided by the average total assets invested.
3. We know that net income equals total revenues less total expenses. For
4. Apple’s return on assets of 20.4% is good given that it exceeds its
Comparative Analysis — BTN 1-2
($ millions)
Apple
Google
2. Return on assets
$53,394
$16,348
3. Revenues-Expenses
$233,715 – Expenses
$74,989 – Expenses
4. Analysis of return on assets: Apple’s 20.4% return is good given the
5. Analysis conclusions: Google’s return is adequate (better when compared
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 1
54
Ethics Challenge — BTN 1-3
1. There are several parties affected. They include the users of financial
2. A major factor in the value of an auditor's report is the auditor's
independence. If an auditor accepted a fee that increases when the client’s
3. Thorne should not accept this fee arrangement. To avoid compromising
the auditor's independence, Thorne should reject it. (Further, the AICPA
4. Ethical considerations guiding this decision include the potential harm to
Communicating in Practice — BTN 1-4
1. Deciding whether Apple is a good loan risk can be difficult because the
planned expansion is risky if customer demand does not meet
expectations. As a loan officer in this situation you would want information
2. How the company is organized is important to a loan officer. If it is a
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 1
Taking It to the Net — BTN 1-5
$ thousands
2015
2014
2013
2012
2011
1. Rocky Mountain Chocolate Factory’s (RMCF) revenues exhibit a
2. Net income performance for RMCF decreased from 2011 through 2013,
Teamwork in Action — BTN 1-6
Suggestions for forming support/learning teams are in the Instructor’s
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 1
56
Entrepreneurial Decision — BTN 1-7
1. (a) AccountApp’s total amount of liabilities and equity consists of the
bank loan and the owner investments. Specifically:
Hitting the Road — BTN 1-8
Check each student’s report for the following content:
Wild, Shaw, Chiappetta, FAP 23e Solutions Manual: Chapter 1
57
Global Decision — BTN 1-9
1. Samsung’s net income and revenues figures are computed using
Korean Won (KRW), which is the currency of Korea. In contrast, Apple
2. Samsung’s return on assets ratio eliminates differences in monetary
units (between KRW and dollars). Consequently, we need not focus on
