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Chapter 01 - A Framework for Financial Accounting
Chapter 1
A Framework for Financial Accounting
EXERCISES
Exercise 1-1
1.
a.
Exercise 1-2
Transaction
Account
Activity
1. Falcon provides services to customers.
Revenue
Operating
Exercise 1-3
Transaction
Account
Activity
1. Wildcat pays rent for the current month.
Expense
Operating
Chapter 01 - A Framework for Financial Accounting
Exercise 1-4
Requirement 1
Revenues
−
Expenses
=
Net Income
Requirement 2
Assets
=
Liabilities
+
Stockholders’
equity
Exercise 1-5
Requirement 1
Revenues
−
Expenses
=
Net Loss
Requirement 2
Assets
=
Liabilities
+
Stockholders’
equity
Exercise 1-6
Cowboy Law Firm
Income Statement
Service revenue
$12,700
Expenses:
Exercise 1-7
Buffalo Drilling
Statement of Stockholders’ Equity
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Beginning balance
$ 8,700
$ 7,900
$16,600
Exercise 1-8
Wolfpack Construction
Balance Sheet
Assets
Liabilities
Cash
$ 7,500
Accounts payable
$ 4,200
Stockholders’ Equity
Common stock
12,700
*
Assets
=
Liabilities
+
Stockholders’ equity
$42,500
=
$16,400
+
($12,700 + Retained earnings)
Exercise 1-9
Requirement 1
Beginning balance
$ 5,100
Cash received from sale of products to customers
27,300
Requirement 2
Tiger Trade
Statement of Cash Flows
Cash Flows from Operating Activities
Cash inflows:
From sale of products to customers
$27,300
Cash Flows from Investing Activities
Purchase factory equipment
(40,200)
Cash Flows from Financing Activities
Borrow from bank
36,900
Exercise 1-10 (LO 1-3)
Requirement 1
Fighting Okra Cooking Services
Income Statement
Service revenue
$76,000
Expenses:
Salaries
$22,000
Requirement 2
Fighting Okra Cooking Services
Statement of Stockholders’ Equity
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Beginning balance
$300,000
$28,000
$328,000
Exercise 1-11 (LO 1-3)
Requirement 1
Artichoke Academy
Statement of Stockholders’ Equity
For the period ended December 31, 2018
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Beginning balance
$160,000
$40,000
$200,000
Requirement 2
Artichoke Academy
Balance Sheet
December 31, 2018
Assets
Liabilities
Cash
$23,600
Accounts payable
$ 8,100
Supplies
13,000
Utilities payable
2,600
Stockholders’ Equity
Exercise 1-12 (LO 1-3)
Requirement 1
Squirrel Tree Services
Balance Sheet
Assets
Liabilities
Stockholders’ Equity
Common stock
41,000
Requirement 2
Squirrel Tree Services
Statement of Cash Flows
Cash Flows from Operating Activities
Cash inflows from customers
$ 58,000
Cash Flows from Investing Activities
Sale investments
11,000
Cash Flows from Financing Activities
Borrow from bank
22,000
Exercise 1-13
1.
Revenues
−
Expenses
=
Net Income
2.
Change in
stockholders’
equity
=
Issue common
stock
+
Net
Income
−
Dividends
3.
Assets
=
Liabilities
+
Stockholders’
equity
4.
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
Exercise 1-14
Year
Net
Income
Dividends
Retained
Earnings*
Exercise 1-15
($ in billions)
Change in
retained
earnings
=
Net Income
−
Dividends
1.
Change in
retained
earnings
=
Net Income
−
Dividends
2.
Change in
retained
earnings
=
Net Income
−
Dividends
3.
Change in
retained
earnings
=
Net Income
−
Dividends
4.
Change in
retained
earnings
=
Net
Income
−
Dividends
5.
Change in
retained
earnings
=
Net
Income
−
Dividends
Exercise 1-16
($ in billions)
Assets
=
Liabilities
+
Stockholders
’ equity
1.
Assets
=
Liabilities
+
Stockholders’
equity
2.
Assets
=
Liabilities
+
Stockholders’
equity
3.
Assets
=
Liabilities
+
Stockholders’
equity
4.
Change in
Assets
=
Change in
liabilities
+
Change in
stockholders’
equity
5.
Change in
Assets
=
Change in
liabilities
+
Change in
stockholders’
equity
Chapter 01 - A Framework for Financial Accounting
Exercise 1-17
($ in billions)
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
1.
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
2.
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
3.
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
4.
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
5.
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
Chapter 01 - A Framework for Financial Accounting
Exercise 1-18 (LO 1-5)
1.
d.
Exercise 1-19
1.
h. Verifiability
Exercise 1-20
1.
b.
