Exercise 2.

1
Assets: are the economics resources owned by a business to earn profit either at present or in future. Examples American Air Lines 1 Air Crafts 2 Office equipment 3 Stock fuel Boston Celtics: 1 Sport material 2 Office building 3 Cash account Liabilities: are the claim of persons other then owners on the assets of the business Examples American Air Lines 1 Tickets booking in advance 2 Accounts payables 3 Salaries payable Boston Celtics: 1 Remuniration received in advance 2 Accounts payables 3 Salaries payable

Exercise 2.2
DIXIE TRANSPORTATION SERVICE BALANCE SHEET AS ON FEB 28TH, 2005 Assets Cash Account Receivables Supplies Automobile Building Land Amount $ 69000 70000 14000 165000 80000 70000 468000 Equities Account Payable Notes Payable Capital Stock Retained Earnings Amount $ 26000 288000 92000 62000 468000

Exercise 2.3
Mercer Company Balance Sheet As of December 31, 2005 Assets Cash Accounts Receivables Office Equipment Building Land Amount 36300 56700 12400 210000 90000 Equities Accounts Payable Notes Payable Capital Stock Retained Earnings Amount 43800 207000 75000 79600

405400

405400

Exercise 2.4
a b c Correct Value 1700, Principle violated are going concern Valuation is correct according to cost principle Correct Value is zero according to Objectivity and full disclousor.

Exercise 2.5
Sl a b c Assets 578000 1132500 307500 Liabilities 342000 562500 120300 Owner's Equity 236000 570000 187200

Exercise 2.6
Transaction a b c d e f g h i Assets I NE D D I I I NE NE Liabilities I NE D D NE I NE NE NE Owner's Equity NE NE NE NE I NE I NE NE

Exercise 2.7
a b c d e Purchases equipment on credit Payed accounts payable Collected Accounts Receivables Sold furniture at higher then its cost Purchased land for cash and on credit

Exercise 2.8
1 Fellingham Software Company Balance Sheet Owner's Equity Section Capital Johnna Small 390000

Fellingham Software Company Balance Sheet Owner's Equity Section

Capital Johnna Small Capital Mikki Yato

240000 150000

Fellingham Software Company Balance Sheet Owner's Equity Section Capital Stock Retained Earnings 250000 140000

Exercise 2.9
Sl a b c d Accounts Cash Accounts Payable Accounts Receivables Capital Stock Increase/Decrease Decrease Decrease NE NE

Exercise 2.10
a b Because accounting is not a static subject 1 Calculation of Depreciation 2 Adjusting entires 3 Choice of Inventory valuation method

Exercise 2.11
Gardial company Cash flow statement For the Period ended on Description Opening Balance Operating Activities Revenue earned Expenses payed $ $ 7450

10000 -7500 2500

Investing Activities Equipment purchased Financing Activities Share sold Bank Loan payed off Closing balance

-2500 -2500 6000 -2000

4000 11450

Exercise 2.12
Hernandez, Inc. Income statement For the period ended on $ Less Revenue earned Expenses incurred Net Income 9500 5465 4035

Exercise 2.13
YARNELL COMPANY Income Statement For the Period ended on August 31,2005 Revenue Services provided to customers Expenses Expenses required to provide services to customers Net Income 7500 7500 $ 15000

Ecercise 2.18
Years 2000 2001 2002 Net Income as a % of Revenue 31.23703 Mix Trend 4.864539 11.64624

Problem Set (A)

Problem 2.1
Smokey Mountain Lodge Balance Sheet As on December, 31, 2005 Assets Cash Accounts Receivable Equipment Snowmobiles Furnishings Building Land Amount $ Equities 31400 Salaries Payable 10600 39200 15400 58700 450000 425000 1030300 Interest Payable Accounts Payable Note Payable Capital Stock Retained Earnings Amount $ 33500 12000 54800 620000 135000 175000 1030300

Yes if there is no current payable then the balance sheet will be stronger

Problem 2.2
a b c d e f Purchased equipment for Cash Rs. 3200 Collected accounts receivables Rs. 900 Purchased equipment for cash Rs. 3500 and on credit Rs 10000 Payed accounts Payable Rs. 14500 Invested Cash Rs. 15000 Purchased equipment on Credit Rs. 7500

Problem 2.3
Goldstar communications Assets Liabilities Owner's Equity Cash Land Building Office Eqp N/Payable Acc/Pay Capital Stock Balance 37000 95000 125000 51250 80000 28250 200000 1 35000 35000 Balance 72000 95000 125000 51250 80000 28250 235000 2 -22500 35000 55000 67500 Balance 49500 130000 180000 51250 147500 28250 235000 3 9500 9500 Balance 49500 130000 180000 60750 147500 37750 235000 4 20000 20000 Balance 69500 130000 180000 60750 167500 37750 235000 5 -28250 -28250 Balance 41250 130000 180000 60750 167500 9500 235000 412000 412000

Problem 2.4
Balance 1 Balance 2 Balance 3 Balance 4 Balance 5 Balance 6 Balance Rankin Truck Rental Assets Cash Acc/Rec Trucks Office Eqp 9500 13900 68000 3800 -2700 2700 6800 13900 68000 6500 4000 -4000 10800 9900 68000 6500 -3200 7600 9900 68000 6500 10000 17600 9900 68000 6500 -15000 30500 2600 9900 98500 6500 75000 77600 9900 98500 6500 192500 Liabilities Owner's Equity Note/Pay Acc/Pay Capital Stock 20000 10200 65000 20000 20000 -3200 16800 10000 26800 15500 42300 42300 10200 10200 10200 10200 10200 10200 192500 65000 65000 65000 65000 65000 75000 140000

Problem 2.5
a HERE COME THE CLOWNS BALANCE SHEET AS ON JUNE 30 2005 Assets Cash Accounts Receivalbe Notes Receivabled Costumes Animals Cages Props & Equipment Tents Trucks & Wagons Amount 32420 7450 9500 Equities Salaries Payable Accounts Payable Ntoes Payable Amount 9750 26100 180000 310000 27230

31600 Capital Stock 189060 Retained Earninds 24630 89580 63000 105840 553080

553080

HERE COME THE CLOWNS BALANCE SHEET AS ON JUNE 30 2005 Assets Cash Accounts Receivalbe Notes Receivabled Costumes Animals Cages Props & Equipment Tents Trucks & Wagons Amount 32420 7450 9500 Equities Salaries Payable Accounts Payable Ntoes Payable Amount 9750 26100 180000 310000 12930

31600 Capital Stock 189060 Retained Earninds 24630 89580 48700 105840 538780

538780

Problem 2.6
Wilson Farms, Inc Balance Sheet As on September 30, 2005 a Assets Cash Accounts Receivable Farm Machinery Livestock Barns and sheds Fences and Gates Irrigation System Citurs Trees Land Amount Equities 16710 22365 Wages Payable Property Taxes Payable 42970 Accounts Payable 120780 Notes Payable 78300 33570 20125 76095 Capital Stock 490000 Reained Earings 900915 Amount 5820 9135 77095 330000

290000 188865 900915

Wilson Farms, Inc Balance Sheet As on September 30, 2005 b Assets Cash Accounts Receivable Farm Machinery Livestock Barns and sheds Fences and Gates Irrigation System Citurs Trees Land Amount Equities 16710 22365 Wages Payable Property Taxes Payable 42970 Accounts Payable 120780 Notes Payable 64600 33570 20125 76095 Capital Stock 490000 Reained Earings 887215 Amount 5820 9135 77095 330000

276300 188865 887215

Problem 2.7
Oven Bakery Balance Sheet As on August 1, 2005 a Assets Cash Accounts Receivables Supplies Equipment & Fixtures Building Land Amount 6940 11260 7000 Equities Salaries Payable Accounts Payable Notes Payable Amount 8900 16200 74900

44500 64000 Capital Stock 67000 Retained Earnings 200700

80000 20700 200700

Oven Bakery Balance Sheet As on August 3, 2005 b Assets Cash Accounts Receivables Supplies Equipment & Fixtures Building Land Amount 14490 11260 8250 Equities Salaries Payable Accounts Payable Notes Payable Amount 8900 7200 74900

51700 64000 Capital Stock 67000 Retained Earnings 216700 6940+25000-16200-1250 80000+25000

105000 20700 216700

Cash Capital Stock

Problem 2.8
Sweet Sode Shop Balance Sheet As on September 30, 2005 a Assets Cash Accounts Receivables Supplies Furniture & Fixture Building Land Amount Equities 7400 1250 Accounts Payable 3440 Notes Payable 20000 45500 Capital Stock 55000 Retained Earnings 132590 Amount 8500 70000

50000 4090 132590

Sweet Sode Shop Balance Sheet As on September 30, 2005 b Assets Cash Accounts Receivables Supplies Furniture & Fixture Building Land Amount Equities 29400 1250 Accounts Payable 4440 Notes Payable 38000 45500 Capital Stock 55000 Retained Earnings 173590 7400+30000-8500-1000+1500 30000+50000+1500 Amount 18000 70000

81500 4090 173590

Cash Capital Stock

Problem 2.9
BERKELEY PLAYHOUSE Balance Sheet

30-Sep-05 Assets Cash Accounts Receivables Props & costumes Lighting Equipments Amount Equities 16900 Salaries Payable 7200 Accounts Payable Notes Payable 18000 9400 Capital Stock 51500 Amount 4200 3900 15000

28400 51500

Problem 2.10
BIG SCREEN SCRIPTS Balance Sheet As on November 30, 2005 Assets Cash Accounts Receivables Notes Receivable Office Furniture Building Land Amount Equities 3940 Accounts Payable 2450 Notes Payable 2200 12825 54320 Capital Stock 39000 Retained Earnings 114735 Amount 32700 73500

8535

114735

Cash 21900 5000 16900

Acc rec 132200

Props 125000 7200 3000 15000 18000

building 27000

27000

equipments 9400

auto 15000 15000

Acc payable 2100 3900

6000

Salaries payable 25000 4200

capital 29200 50000

Note payable 15000