Problem 1-7B (60 minutes) Parts 1 and 2
Assets
=
Liabilities
+
Equity
Date
Cash
+
+
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Revenues
–
Expenses
June
1
+$130,000
=
+
$130,000
2
– 6,000
=
–
$6,000
=
6
– 1,150
=
–
8
+ 850
=
+
=
– 800
=
–
800
+ 7,500
=
+
=
+
+
=
+
+ 7,900
=
– 2,400
=
– 800
=
–
– 4,000
=
– 150
=
–
– 890
=
–
Problem 1-7B (Continued)
Part 3
Niko’s Maintenance Co.
Income Statement
For Month Ended June 30
Revenues
Maintenance services revenue ………. $16,925
Expenses
Niko’s Maintenance Co.
Statement of Retained Earnings
For Month Ended June 30
Retained earnings, June 1 ………………………….. $ 0
Niko’s Maintenance Co.
Balance Sheet
June 30
Assets
Liabilities
Problem 1-7B (Concluded)
Part 3—continued
Niko’s Maintenance Co.
Statement of Cash Flows
For Month Ended June 30
Cash flows from operating activities
Cash paid for rent ………………………………………………..
Cash paid for advertising …………………………..…………
Cash paid for telephone ……………………………………….
Cash paid for utilities …………………………………………..
Cash paid to employees …………………………..…………..
Net cash provided by operating activities ……………..
Cash flows from investing activities
Purchase of equipment ………………………………………..
Net cash used by investing activities ……………………
Cash flows from financing activities
Investments from stockholders …………………………...
Net increase in cash …………………………………………….
Cash balance, June 1 …………………………………………..
Problem 1-8B (60 minutes) Parts 1 and 2
Assets
=
Liabilities
+
Equity
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Building
=
Accounts
Payable
+
Notes
Payable
+
Common
Stock
–
Dividends
+
Reve-
nues
–
Expen-
ses
a.
+ $90,000
+
$10,000
+
$100,000
b.
– 40,000
+
$150,000
+
$110,000
Bal.
+
+
=
110,000
+
c.
+
Bal.
+
+
=
110,000
+
+
+
Bal.
25,000
1,200
+
36,700
+
150,000
=
2,900
+
110,000
+
100,000
– 750
–
Bal.
24,250
+
1,200
+
36,700
+
150,000
=
2,900
+
110,000
+
100,000
–
750
+
+
Bal.
24,250
+
+
1,200
+
36,700
+
150,000
=
2,900
+
110,000
+
100,000
+
–
750
+ 4,000
+
Bal.
28,250
+
+
1,200
+
36,700
+
150,000
=
2,900
+
110,000
+
100,000
+
6,800
–
750
$11,500
Bal.
+
+
+
+
+
+
+
–
+ 1,800
–
Bal.
+
+
+
+
+
+
+
–
Bal.
+
+
+
+
+
+
+
–
–
2,500
–
Problem 1-8B (Concluded)
Part 3
Problem 1-9B (60 minutes) Parts 1 and 2
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Roofing
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Reve-
nues
–
Expen-
ses
July
1
+ $80,000
=
+
$80,000
2
– 700
–
$700
Bal.
79,300
=
80,000
–
700
Bal.
78,300
+
=
4,000
+
80,000
–
700
Bal.
77,700
+
=
+
80,000
–
700
+
Bal.
85,300
+
=
+
80,000
+
–
700
10
Bal.
85,300
+
+
2,300
+
5,000
=
6,300
+
80,000
+
–
700
15
+
+
8,200
Bal.
85,300
+
8,200
+
+
2,300
+
5,000
=
6,300
+
80,000
+
15,800
–
700
17
Bal.
85,300
+
8,200
+
3,700
+
2,300
+
5,000
=
9,400
+
80,000
+
15,800
–
700
23
Bal.
83,000
+
8,200
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
15,800
–
700
25
+
5,000
+
5,000
Bal.
83,000
+
13,200
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
20,800
–
700
28
+ 8,200
–
8,200
Bal.
91,200
+
5,000
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
20,800
–
700
30
– 1,560
–
Bal.
89,640
+
5,000
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
20,800
–
2,260
31
–
295
Bal.
89,345
+
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
20,800
–
2,555
31
Bal.
+
+
+
$2,300
+
$5,000
=
+
$80,000
$1,800
+
$20,800
–
1,560
Problem 1-9B (Continued)
Part 3
Rivera Roofing Company
Income Statement
For Month Ended July 31
Revenues
Roofing fees earned ……………………………. $20,800
Rivera Roofing Company
Statement of Retained Earnings
For Month Ended July 31
Retained earnings, July 1 …………………….. $ 0
Rivera Roofing Company
Balance Sheet
July 31
Assets Liabilities
Cash ……………………………… $ 87,545 Accounts payable ………….. $ 7,100
Problem 1-9B (Concluded)
Part 3—continued
Rivera Roofing Company
Statement of Cash Flows
For Month Ended July 31
Cash flows from operating activities
Cash received from customers1 …………………………...
$15,800
Cash paid for rent ………………………………………………..
Cash paid for supplies …………………………………………
Cash paid for utilities …………………………………………..
Cash paid to employees ……………………………………….
Net cash provided by operating activities ……………..
Cash flows from investing activities
Purchase of roofing equipment …………………………….
(1,000)
Purchase of office equipment ……………………………….
Net cash used by investing activities ……………………
Cash flows from financing activities
Investments from stockholders …………………………….
Cash dividends ……………………………………………………
Net cash provided by financing activities ……………..
Net increase in cash …………………………………………….
Cash balance, July 1 …………………………………………….
Part 4
If the $5,000 purchase on July 3 had been acquired through an additional
owner investment of cash, then:
Problem 1-10B (15 minutes)
1. Return on assets is net income divided by average total assets (the
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
Problem 1-11B (15 minutes)
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.
Problem 1-12BA (20 minutes)
Case 1. Return: No return is generated.
Risk: Moderate Risk. By hiding money at home a person
Problem 1-13BB (15 minutes)
Problem 1-14BB (15 minutes)
I. Financing Activities
A. Owner financing—owner invests in the company
II. Investing Activities
A. Buying resources (assets)
B. Selling resources (assets)
III. Operating Activities
A. Use of assets to carry out plans
Serial Problem — SP 1 (30 minutes)
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Computer
Supplies
+
Computer
System
+
Office
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
Revenues
–
Expenses
Oct.
1
+$45,000
$20,000
+
$8,000
+
$73,000
3
+
$1,420
+ $1,420
Bal.
45,000
+
1,420
+
20,000
+
8,000
=
1,420
+
73,000
6
+
+
$ 4,800
Bal.
+
+
+
=
+
+
Bal.
+
+
+
=
+
+
+
+
Bal.
+
+
+
=
+
+
+ 4,800
–
Bal.
+
+
+
=
+
+
47,575
+
+
1,420
+
20,000
+
8,000
=
+
73,000
+
6,200
Bal.
+
+
+
=
+
+
Bal.
+
+
+
=
+
+
+
+
Bal.
+
+
+
=
+
+
Bal.
+
+
+
=
+
+
–
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
Comparative Analysis — BTN 1-2
($ millions)
Apple
Google
1. Total assets =
Liabilities + Equity
$231,839
$131,133
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
3. Thorne should not accept this fee arrangement. To avoid compromising
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
2. How the company is organized is important to a loan officer. If it is a
standard partnership (which it was, and not a LLC), the personal assets of
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
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:
Total assets = Bank Loan + Owner investment
= Liabilities + Equity
Hitting the Road — BTN 1-8
Check each student’s report for the following content:
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