15 Minutes, Medium
Owners’
Assets = Equity
Office Notes Accounts Capital
Cash +
Equipment
Building + Land = Payable + Payable + Stock
December 31 balances 37,000$ 51,250$ 125,000$ 95,000$ 80,000$ 28,250$ 200,000$
(1) 35,000 35,000
Balances 72,000$ 51,250$ 125,000$ 95,000$ 80,000$ 28,250$ 235,000$
(2) (22,500) 55,000 35,000 67,500
Balances 49,500$ 51,250$ 180,000$ 130,000$ 147,500$ 28,250$ 235,000$
(3) 9,500 9,500
MAXWELL COMMUNICATIONS
Liabilities +
PROBLEM 2.3A
Balances 49,500$ 60,750$ 180,000$ 130,000$ 147,500$ 37,750$ 235,000$
(4) 20,000 20,000
Balances 69,500$ 60,750$ 180,000$ 130,000$ 167,500$ 37,750$ 235,000$
(5) (22,250)$ (22,250)$
15 Minutes, Medium
Owners’
Assets = Equity
Accounts Office Notes Accounts Capital
Cash + Receivable +
Equipment +
Trucks = Payable + Payable + Stock
December 31 balances 9,500$ 13,900$ 3,800$ 68,000$ 20,000$ 10,200$ 65,000$
(1) (2,700) 2,700
Balances 6,800$ 13,900$ 6,500$ 68,000$ 20,000$ 10,200$ 65,000$
(2) 4,000 (4,000)
PHILLIPS TRUCK RENTAL
Liabilities +
PROBLEM 2.4A
Balances 10,800$ 9,900$ 6,500$ 68,000$ 20,000$ 10,200$ 65,000$
(3) (3,200) (3,200)
Balances 7,600$ 9,900$ 6,500$ 68,000$ 20,000$ 7,000$ 65,000$
Balances 17,600$ 9,900$ 6,500$ 68,000$ 30,000$ 7,000$ 65,000$
Balances 2,600$ 9,900$ 6,500$ 98,500$ 45,500$ 7,000$ 65,000$
Balances 87,600$ 9,900$ 6,500$ 98,500$ 45,500$ 7,000$ 150,000$
20 Minutes, Medium
a.
Liabilities & Owners’ Equity
Liabilities:
Cash * 27,024$ Notes payable 216,000$
Notes receivable 11,400 Accounts payable 31,320
Accounts receivable 8,940 Salaries payable 11,700
b.
PROBLEM 2.5A
HERE COME THE CLOWNS!
The loss of an asset, Tents, from a fire would require a revised balance sheet that reflects a decrease
in total assets. When total assets are decreased, the other balance sheet total (that is, the total of
HERE COME THE CLOWNS!
Balance Sheet
June 30, current year
Assets
20 Minutes, Medium
a.
Liabilities & Owners’ Equity
Cash 16,710$ Liabilities:
Accounts receivable 22,365 Notes payable 330,000$
Barns and sheds 78,300 Accounts payable 77,095
b.
The loss of an asset, Barns and Sheds, from a tornado would cause a decrease in total assets. When
ALEXANDER FARMS, INC.
Balance Sheet
PROBLEM 2.6A
ALEXANDER FARMS, INC.
September 30, current year
Assets
a.
Liabilities & Owners’ Equity
Cash 6,940$ Liabilities:
Accounts receivable 11,260 Notes payable 74,900$
b.
Liabilities & Owners’ Equity
Cash 14,490$ Liabilities:
Accounts receivable 11,260 Notes payable 74,900$
PROBLEM 2.7A
FRANKLIN BAKERY
35 Minutes, Medium
FRANKLIN BAKERY
Balance Sheet
August 1, current year
Assets
FRANKLIN BAKERY
Balance Sheet
August 3, current year
Assets
Cash flows from operating activities:
(16,200)$
None
c.
PROBLEM 2.7A
FRANKLIN BAKERY (concluded)
FRANKLIN BAKERY
Statement of Cash Flows
For the Period August 1-3, current year
Franklin Bakery is in a stronger financial position on August 3 than it was on August 1.
Cash payment of accounts payable
Cash flows from investing activities:
Cash flows from financing activities:
a.
Liabilities & Owners’ Equity
Cash 7,400$ Liabilities:
b.
Liabilities & Owners’ Equity
5,500$
PROBLEM 2.8A
THE SODA SHOP
40 Minutes, Strong
THE SODA SHOP
Balance Sheet
September 30, current year
Assets
THE SODA SHOP
Income Statement
For the Period October 1-6, current year
Revenues
Balance Sheet
October 6, current year
Assets
THE SODA SHOP
Cash flows from financing activities:
Cash flows from operating activities:
5,500$
Cash paid for expenses (4,000)
None
c.
PROBLEM 2.8A
THE SODA SHOP (concluded)
THE SODA SHOP
The Soda Shop is in a stronger financial position on October 6 than on September 30. On
September 30, the company had highly liquid assets (cash and accounts receivable) of $8,650, which
Statement of Cash Flows
For the Period October 1-6, current year
Cash received from revenues
Cash flows from investing activities:
Cash used in operating activities
a.
Liabilities & Owner’s Equity
Cash 16,900$ Liabilities:
b. (1)
(2)
(3)
(4)
(5)
The lighting equipment is an asset of the business and should be presented in the balance sheet
(6)
(7)
The cash in Anita Spencer‘s personal savings account is not an asset of the business entity
Spencer Playhouse. Therefore, it should not appear in the balance sheet of the business. The
PROBLEM 2.9A
SPENCER PLAYHOUSE
35 Minutes, Strong
SPENCER PLAYHOUSE
Balance Sheet
September 30, current year
Assets
As the automobile is not used in the business, it appears to be Anita Spencer’s personal asset
The accounts payable should be limited to the debts of the business, $3,900, and should not
Only the amount receivable from Artistic Tours ($7,200) should be included in the company’s
The props and costumes should be shown in the balance sheet at their cost, $18,000 , not at just
The theater building is not owned by Spencer Playhouse. Therefore, it is not an asset of this
(8)
(9)
PROBLEM 2.9A
Owner’s equity is not valued at either the original amount invested or at the estimated market
value of the business. In fact, owner’s equity cannot be valued independently of the amounts
The amount owed to stagehands for work done through September 30 is the result of completed
SPENCER PLAYHOUSE (concluded)
a.
Liabilities & Owner’s Equity
Cash 3,940$ Liabilities:
Notes receivable 2,200 Notes payable 73,500$
b. (1)
(2)
(3)
(4)
(5)
(6)
(7)
PROBLEM 2.10A
BIG SCREEN SCRIPTS
30 Minutes, Strong
BIG SCREEN SCRIPTS
Balance Sheet
November 30, current year
Assets
The proper valuation for the land is its historical cost of $39,000, the amount established by the
The $22,400 described as “Other assets” is not an asset, because there is no valid legal claim or
The cash in Pippin’s personal savings account is not an asset of the business entity Big Screen
The year-old IOU from a poker game does not qualify as a business asset for two reasons. Most
as an asset, as it represents no future economic benefit.
The total amount to be included in “Office furniture” for the rug is $9,400, the total cost,
The computer is no longer owned by Big Screen Scripts and therefore cannot be included in the
furniture” amount must be reduced by $2,525.
a.
Liabilities & Owners’ Equity
Cash 10,920$ Liabilities:
Accounts receivable 3,960 Accounts payable 32,880$
Furnishings 27,120 Salaries payable 15,840
b.
SOLUTIONS TO PROBLEMS SET B
PROBLEM 2.1B
TRI-STATE LODGE
15 Minutes, Easy
Assets
TRI-STATE LODGE
Balance Sheet
December 31, Year-1
The balance sheet indicates that Tri-State Lodge is in a weak financial position. The highly
a.
PROBLEM 2.2B
15 Minutes, Easy
PROSPERITY COMPANY
Description of transactions:
Purchased furniture for cash at a cost of $800.
Purchased furniture on account for $3,000.
Paid $2,000 of accounts payable.
Received $500 cash from collection of accounts receivable.
$10,000 cash was received from the sale of capital stock.
15 Minutes, Medium
Assets = Equity
Office Notes Accounts Capital
Cash +
Equipment +
Building + Land = Payable + Payable + Stock
December 31 balances 14,400$ 49,560$ 79,200$ 96,000$ 50,400$ 8,760$ 180,000$
(1) 48,000 48,000
Balances 62,400$ 49,560$ 79,200$ 96,000$ 50,400$ 8,760$ 228,000$
DELTA CORPORATION
Liabilities +
PROBLEM 2.3B
Balances 50,400$ 49,560$ 139,200$ 132,000$ 134,400$ 8,760$ 228,000$
(3) 9,600 9,600
Balances 50,400$ 59,160$ 139,200$ 132,000$ 134,400$ 18,360$ 228,000$
(4) 14,400 14,400
Balances 64,800$ 59,160$ 139,200$ 132,000$ 148,800$ 18,360$ 228,000$
Balances 57,600$ 59,160$ 139,200$ 132,000$ 148,800$ 11,160$ 228,000$
15 Minutes, Medium
Owners’
Assets = Equity
Accounts Office Notes Accounts Capital
Cash + Receivable + Trucks + Equipment = Payable + Payable + Stock
December 31 balances 4,700$ 8,300$ 72,000$ 3,000$ 10,000$ 8,000$ 70,000$
(1) (2,600) 2,600 –
Balances 2,100$ 8,300$ 72,000$ 5,600$ 10,000$ 8,000$ 70,000$
(2) 2,500 (2,500)
MAXX TRUCKING
Liabilities +
PROBLEM 2.4B
Balances 4,600$ 5,800$ 72,000$ 5,600$ 10,000$ 8,000$ 70,000$
(3) (2,000) (2,000)
Balances 2,600$ 5,800$ 72,000$ 5,600$ 10,000$ 6,000$ 70,000$
(4) 5,000 5,000
Balances 7,600$ 5,800$ 72,000$ 5,600$ 15,000$ 6,000$ 70,000$
(5) (5,000) 60,000 55,000
Balances 2,600$ 5,800$ 132,000$ 5,600$ 70,000$ 6,000$ 70,000$
a.
Liabilities & Owners’ Equity
Cash * 9,150$ Liabilities:
Notes receivable 1,200 Notes payable 115,000$
b.
PROBLEM 2.5B
CIRCUS WORLD
20 Minutes, Medium
The loss of an asset, Tents, from a fire would require a revised balance sheet that reflects a decrease
CIRCUS WORLD
Balance Sheet
June 30, current year
Assets