Chapter 1
E1-4
1.
The accounting method used is Incorrect. Because the cost principle requires that
assets (such as buildings) be recorded and reported at their cost.
2. The accounting method used is Correct. Because according to the monetary unit
assumption requires that companies include in the accounting records only transaction
data that can be expressed in terms of money be included in the accounting records.
This assumption enables accounting to quantify (measure) economic events. The
monetary unit assumption is vital to applying the cost principle
3. The accounting method used is Incorrect. Because according to The Economic Entity
Assumption says that the activities of the entity are to be kept separate from the
activities of its owner and all other economic entities. The business is accounted for
separately from other business entities, including its owner. The reason for this is that
separate information about each business is necessary for good decisions. Economic
entity can be any organization or unit in society.
E1-7
1. C
2. D
3. A
4. B
5. D
6. B
7. E
8. F
E1-11
For (a)
Total assets (beginning of year) .....................................................................................
Total liabilities (beginning of year) ................................................................................
a) Total stockholders equity (beginning of year) .
$12,000
$ 97,000
85,000
For (b)
$ 40,000
12,000
$ 28,000
$215,000
175,000
$ 40,000
$ 28,000
(16,000 )
For (c)
Total assets (beginning of year) .....................................................................................
Total stockholders equity (beginning of year) ..............................................................
(c) Total liabilities (beginning of
year)$ 54,000
$129,000
75,000
For (d)
Total stockholders equity (end of year) ........................................................................
Total stockholders equity (beginning of year) ..............................................................
Increase in stockholders equity ....................................................................................
$130,000
75,000
$ 55,000
$100,000
55,000
$ 45,000
$ 55,000
$(45,000)
(25,000)
(70,000)
PROBLEM P1-2A
a.
DONAHUE VETERINARY CLINIC
Accounts
Office
Notes
Accounts Common
Retained
Cash + Receivable + Supplies + Equipment = Payable + Payable + Stock + Earnings + Revenues Expenses Dividends
$ 9,000 + $1,700
2,900
+ $600
00,000
6,100 +
1,700
1,300
+1,300
7,400 +
800
400
6,600 +
400
400
5,200
5,200
600
600
600
600
$3,600
6,000
6,000
8,100
700
8,100
700
8,100
$700
0
+
13,000
700
13,000
700
13,000
700
+1,300
=
2,000
00,000
2,000
000,000
+
00,000
=
000,000
+
+ $13,000
2,900
+2,100
0000
+
000,000
+
0000
00,000
8,700 +
0000
+4,800
9,100 +
600
$ 6,000
000,000
0000
+
00,000
+2,500
0000
+$7,300
+
13,000
700
7,300
13,000
700
7,300
$400
00,000
=
2,000
400
$1,700
900
2,800
00,000
5,900 +
000,000
5,200
0000
+
00,000
5,900 +
5,200
600
000,000
+
0000
+
600
8,100
2,000
2,170
000,000
+
8,100
+10,000
200
00,000
+
13,000
700
7,300
2,800
13,000
700
7,300
2,970
+ $13,000
$700
400
170
+170
400
+$10,000
$15,900 + $5,200
+ $600
$ 8,100
= +$10,000 + $2,170
$7,300
$ 2,970
b.
Income Statement
For the Month Ended September 30, 2014
Revenues
Service revenue............................................................................
Expenses
Salaries and wages expense.........................................................
Rent expense................................................................................
Advertising expense .....................................................................
Utilities expense ...........................................................................
Total expenses ...................................................................
$7,300
$1,700
900
200
170
2,970
$400
$ 700
4,330
5,030
400
$4,630
Balance Sheet
September 30, 2014
Assets
Cash ..
$15,900
Accounts receivable ................................................................................
Supplies ...................................................................................................
Equipment ...............................................................................................
Total assets .............................................................................................
5,200
600
8,100
$29,800
CHAPTER 1 HW SCREENSHOT
Exercise 1-4
$10,000
2,170
12,170
$13,000
4,630
17,630
$29,800
Principle/Assumption
Incorrect
Cost principle
Correct
Incorrect
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Exercise 1-7
Your answer is correct.
Collins Computer Timeshare Company entered into the following transactions during May
2014.
Describe the effect of each transaction on assets, liabilities, and stockholder's equity.
1. Purchased
computer
terminals for
$20,000
from Digital
Equipment
on account.
2. Paid $3,000
cash for May
rent on
storage
space.
3. Received
$15,000
cash from
customers
for contracts
billed in
April.
4. Provided
computer
services to
Schmidt
Construction
Company for
$2,400
cash.
5. Paid Central
States
Power Co.
$11,000
cash for
energy
usage in
May.
6. Stockholders
invested an
additional
$32,000 in
the
business.
7. Paid Digital
Equipment
for the
terminals
purchased in
(1) above.
8. Incurred
advertising
expense for
May of $900
on account.
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Exercise 1-11
Your answer is correct.
Two items are omitted from each of the following summaries of balance sheet and income
statement data for two corporations for the year 2014, Steven Craig and Georgia
Enterprises.
Determine the missing amounts.
Steven
Craig
Georgia
Enterprises
Beginning of year:
Total assets
$97,000
Total liabilities
$129,000
85,000
12,000
54,000
(a)
(c)
75,000
End of year:
Total assets
160,000
180,000
Total liabilities
120,000
50,000
40,000
130,000
12,000
24,000
(b)
25,000
15,000
(d)
Total revenues
215,000
100,000
Total expenses
175,000
55,000
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*Problem 1-2A
On August 31, the balance sheet of Donahue Veterinary Clinic showed Cash $9,000, Accounts
Receivable $1,700, Supplies $600, Equipment $6,000, Accounts Payable $3,600, Common Stock
$13,000, and Retained Earnings $700. During September, the following transactions occurred.
1.
2.
3.
Purchased additional office equipment for $2,100, paying $800 in cash and the balance on
account.
4.
Earned revenue of $7,300, of which $2,500 is paid in cash and the balance is due in
October.
5.
6.
Paid salaries $1,700, rent for September $900, and advertising expense $200.
7.
8.
*(a)
Your answer is correct.
Prepare a tabular analysis of the September transactions beginning with August 31 balances. (If
a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a
negative sign (or parentheses) in front of the amount entered for the particular Asset,
Liability or Equity item that was reduced. See Illustration 1-8 for example.)
DONAHUE VETERINARY CLINIC
Assets
Liabilities
Stockholders' Equity
Account
Accou
Retain
Office Notes
Comm
+
s
+
+
=
+ nts +
+ ed +
2900
2.
+130
0
3.
-800
4.
+250
0
5.
-400
6.
2800
-2900
-1300
+2100
+1300
+4800
+7300
-400
-2800
7.
8.
+170
+100
00
+100
00
-170
$
1590
0
$ 5200
$ 600
$
$ 8100=
$ 2170
10000
$
13000
$ 700
$ 7300
$2970
$ -400
Attempts: 3 of 3 used
*(b1)
Your answer is correct.
Prepare an income statement for September.
DONAHUE VETERINARY CLINIC
Income Statement
For the Month Ended September 30, 2014
Revenues
$ 7300
Expenses
$ 1700
900
200
170
Total Expenses
Net Income / (Loss)
2970
$ 4330
Attempts: 1 of 3 used
*(b2)
Your answer is correct.
Prepare a retained earnings statement for September. (List items that increase retained
earnings first.)
DONAHUE VETERINARY CLINIC
Retained Earnings Statement
For the Month Ended September 30, 2014
Retained Earnings, September 1
$ 700
4330
5030
Less: Dividends
400
Attempts: 1 of 3 used
*(b3)
Your answer is correct.
Prepare a balance sheet at September 30. (List assets in order of liquidity.)
DONAHUE VETERINARY CLINIC
Balance Sheet
September 30, 2014
Assets
$ 15900
5200
600
8100
Total Assets
$ 29800
Liabilities and Stockholders Equity
Liabilities
$ 10000
2170
Total Liabilities
12170
Stockholders' Equity
$ 13000
4630
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
17630
$ 29800
Attempts: 3 of 3 used