Chapter 1 – A Framework for Financial Accounting
Exercise 1-16 (LO 1-3)
($ in billions)
Assets
=
Liabilities
+
Stockholders
’ equity
1.
Assets
=
Liabilities
+
Stockholders’
equity
$228
=
$107
+
$X
$228
=
$107
+
$121
2.
Assets
=
Liabilities
+
Stockholders’
=
+
=
+
3.
Assets
=
+
=
+
4.
Change in
assets
=
Change in
liabilities
+
Change in
stockholders’
equity
$1.2
=
$0.3
+
$X
$1.2
=
$0.3
+
$0.9
Change in
assets
Change in
liabilities
Change in
=
+
=
+
Chapter 1 – A Framework for Financial Accounting
Exercise 1-17 (LO 1-3)
($ 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
$0
=
$3.6
+
$0.6
+
($4.2)
2.
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
=
$1.4
+
+
3.
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
$0.04
=
+
+
4.
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
$0.02
=
$0.60
+
($1.00)
+
$0.42
5.
Total change
in cash
=
Operating
cash flows
+
Investing
cash flows
+
Financing
cash flows
$0.02
=
+
+
Chapter 1 – A Framework for Financial Accounting
Exercise 1-18 (LO 1-5)
1.
d.
2.
e.
3.
a.
4.
c.
5.
6.
b.
7.
g.
Exercise 1-19 (LO 1-7)
1.
g. Comparability
2.
f. Free from error
3.
4.
5.
6.
7.
8.
9.
j. Understandability
Exercise 1-20 (LO 1-7)
1.
b.
2.
3.
d.
4.
Chapter 1 – A Framework for Financial Accounting
PROBLEMS: SET A
Problem 1-1A (LO 1-2)
Type of business
activity
Transactions
1.
Financing
Pay amount owed to the bank for previous borrowing
2.
Operating
Pay utility costs
3.
Purchase equipment to be used in operations
4.
Operating
Provide services to customers
5.
Operating
Purchase office supplies
6.
Purchase a building
8.
Operating
Pay for research and development costs
9.
Operating
Pay taxes to the IRS
Problem 1-2A (LO 1-2)
Account classifications
Account Names
1.
Stockholders’ equity
Common stock
2.
Asset
Equipment
3.
Liability
Salaries payable
4.
Revenue
Service revenue
5.
Utilities expense
6.
Supplies
7.
Research and development expense
8.
Asset
Land
9.
Income tax payable
10.
Liability
Interest payable
Chapter 1 – A Framework for Financial Accounting
Problem 1-3A (LO 1-3)
Longhorn Corporation
Income Statement
For the year ended Dec. 31, 2021
Service revenue
$67,700
Expenses:
Net income
Longhorn Corporation
Statement of Stockholders’ Equity
For the year ended Dec. 31, 2021
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Beginning balance
$40,000
$18,200
$58,200
Issuance of common stock
Less: Dividends
Ending balance
$68,400
Chapter 1 – A Framework for Financial Accounting
Problem 1-3A (concluded)
Longhorn Corporation
Balance Sheet
Dec. 31, 2021
Assets
Liabilities
Cash
$ 1,200
Accounts payable
$ 4,400
Supplies
Salaries payable
Buildings
Common stock
Retained earnings
Total assets
Chapter 1 – A Framework for Financial Accounting
1-28 Financial Accounting, 5e
Problem 1-4A (LO 1-3)
(Suggested order of calculation)
On the statement of stockholders’ equity,
$7,000 + (c) − $3,000 = $10,000
Chapter 1 – A Framework for Financial Accounting
Problem 1-5A (LO 1-3)
Cornhusker Company
Income Statement
For the year ended December 31, 2021
Service revenues
$37,000
Expenses:
4,900
13,300
3,500
Net income
Cornhusker Company
Statement of Stockholders’ Equity
For the year ended December 31, 2021
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Beginning balance (Jan. 1)
$16,000
$7,300
$23,300
Add: Net income
8,300
Less: Dividends
Ending balance (Dec. 31)
$16,000
$12,400
$28,400
Chapter 1 – A Framework for Financial Accounting
Problem 1-5A (concluded)
Cornhusker Company
Balance Sheet
December 31, 2021
Assets
Liabilities
Total liabilities
Total assets
Chapter 1 – A Framework for Financial Accounting
Problem 1-6A (LO 1-7)
Assumption violated
1.
Going concern
2.
Economic entity
4.
Periodicity
Problem 1-7A (LO 1-7)
1.
d.
2.
b.
3.
4.
6.
g.
7.
h.
8.
9.
Chapter 1 – A Framework for Financial Accounting
1-32 Financial Accounting, 5e
PROBLEMS: SET B
Problem 1-1B (LO 1-2)
Type of business
activity
Transactions
1.
Operating
Pay for advertising
2.
Financing
Pay dividends to stockholders
5.
Purchase equipment
6.
Sell land
8.
Operating
Pay suppliers for purchase of supplies
9.
Operating
Provide services to customers
10.
Invest in securities of another company
Chapter 1 – A Framework for Financial Accounting
Problem 1-2B (LO 1-2)
Account classifications
Account Names
1.
Asset
Cash
2.
Revenue
Service Revenue
4.
Asset
Buildings
5.
Advertising Expense
6.
Asset
Equipment
7.
Interest Expense
8.
Liability
Accounts Payable
9.
Dividends
10.
Liability
Notes Payable
1-34 Financial Accounting, 5e
Problem 1-3B (LO 1-3)
Gator Investments
Income Statement
For the year ended Dec. 31, 2021
Service revenue
$127,600
Expenses:
Advertising
33,500
Salaries
65,100
Utilities
15,500
Interest
3,500
Net income
Gator Investments
Statement of Stockholders’ Equity
For the year ended Dec. 31, 2021
Common
Stock
Retained
Earnings
Total
Stockholders’
Equity
Beginning balance
$100,000
$30,300
$130,300
Issuance of common stock
Add: Net income
Less: Dividends
Ending balance
$111,000
$35,100
$146,100