Weygandt, Kieso, Kimmel, Trenholm, Kinnear

Accounting Principles, Fifth Canadian Edition

EXERCISE 1-10
Assets

+
+
Accounts EquipTrans. Cash
Rec.
ment
Bal.
$8,000
$20,000
1
-2,000
+19,000
2
+5,000
-5,000
3
-4,000
4
-2,000
5
+3,000
6
-1,000
7
+10,000
8
-1,100
9
10
Total
$15,900 + $15,000 +$19,000
$49,900 =

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Liabilities
+
Accounts
Payable
$3,000

+
Note
Payable

Owner's Equity
+
+
B.Paterson B.Paterson Revenues Expenses
Capital
Drawings
$25,000

+17,000
-4,000
-2,000
+3,000
-1,000
+10,000
-1,000

-100

+2,000
+$3,000 +$16,000

-2,000
-$7,100

+ $35,000

+$3,000

$ 49,900

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Chapter 1

Weygandt, Kieso, Kimmel, Trenholm, Kinnear

Accounting Principles, Fifth Canadian Edition

PROBLEM 1-5A
(a)

Apr 1
2
2
7
8
11
17
25
30
30
30

LOKEN TRAVEL AGENCY

Account
Accounts
Office
s
Note
A. Loken, A. Loken,
Cash + Receivable + Supplies + Equipment = Payable + Payable + Capital - Drawings + Revenues - Expenses
+$12,000
+$12,000
1,100
$1,100
2,000
+$7,500
+$5,500
+$300
300
725
+$725
+1,000
+$8,000
+$9,000
300
300
500
$500
3,500
3,500
+400
400
+5,000
5,000
00 0
0 00 0
0
000 0
000000
00 0
00000
00000
$9,875 +
$ 3,000 +
$725 +
$7,500 =
$400 + $5,500 + $12,000 $500 +
$9,000 $5,300

$21,100 = $21,100

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Chapter 1

Weygandt, Kieso, Kimmel, Trenholm, Kinnear

Principles, Fifth Canadian Edition

Accounting

PROBLEM 1-5A (Continued)

(b) Capital Investment ..................................................... $12,000
Less: Drawings .........................................................
500
11,500
Add: Revenue ...........................................................
9,000
Less: Expenses ......................................................... (5,300)
A. Loken, Capital, April 30 ......................................... $15,200
Taking It Further:
Cash received from customers for services to be performed in a
future accounting period should be recorded as a liability (Unearned
Revenue) not as revenue. The company has not earned the revenue
when they receive the cash. Instead, they have an obligation to
perform services in the future, which is a liability.

PROBLEM 1-9A
BENNETTS HOME RENOVATIONS
Income Statement
Year Ended December 31, 2011
Revenues
Renovation fee revenue .............................................. $154,700
Expenses
Interest expense ........................................... $ 1,190
Insurance expense .......................................
3,375
Office supplies expense ..............................
2,975
Salaries expense .......................................... 87,430
Truck operating expense ............................. 19,545
Total expenses .........................................

114,515

Profit ................................................................................. $ 40,185

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Weygandt, Kieso, Kimmel, Trenholm, Kinnear

Principles, Fifth Canadian Edition

Accounting

BENNETTS HOME RENOVATIONS

Statement of Owner's Equity
Year Ended December 31, 2011
J. Bennett, Capital, January 1 ........................................... $54,350
Add: Profit ....................................................................... 40,185
94,535
Less: J. Bennett, Drawings .............................................. 44,800
J. Bennett, Capital, December 31...................................... $49,735

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Weygandt, Kieso, Kimmel, Trenholm, Kinnear

Principles, Fifth Canadian Edition

Accounting

PROBLEM 1-9A (Continued)

BENNETTS HOME RENOVATIONS
Balance Sheet
December 31, 2011

Assets
Cash .................................................................................... $ 7,700
Accounts receivable .......................................................... 10,080
Office supplies ...................................................................
595
Truck ................................................................................... 42,000
Equipment .......................................................................... 29,400
Total assets ................................................................... $89,775
Liabilities and Owner's Equity
Liabilities
Notes payable ................................................................ $30,800
Accounts payable..........................................................
9,240
Total liabilities ........................................................... 40,040
Owner's equity
J. Bennett, Capital .........................................................

49,735

Total liabilities and owner's equity .......................... $89,775

Taking It Further:
In order to prepare the statement of owners equity, you need to have
the amount of the profit or loss for the year. This is why the income
statement is prepared first. The statement of owners equity is
prepared next in order to have the ending capital balance for the
balance sheet.

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