Chapter 1: Problem Set B

Problem 1-1B: Identifying Effects of Transactions on Financial Statements (P1) • • • • • Task: Analyze how each of 10 separate transactions affects financial statements (balance sheet, income statement, cash flows). Solution Strategy: For each transaction, identify changes to assets, liabilities, equity, net income, and cash flows, indicating whether they increase or decrease (with corresponding amounts). Balance Sheet: Look for effects on total assets, total liabilities, and total equity. Income Statement: Identify impacts on net income. Cash Flows: Analyze the effects on cash flows from operating, investing, and financing activities. Problem 1-2B: Computing Missing Information Using Accounting Knowledge (A1) • • Task: Answer questions for five companies regarding equity, liabilities, and net income, filling in missing financial data. Solution Strategy: o Company V: Calculate beginning and ending equity, and net income. o Company W: Determine equity and liabilities. o Company X: Compute stock issuances. o Company Y: Calculate total assets. o Company Z: Determine liabilities at the beginning of the year. Problem 1-3B: Preparing an Income Statement (P2) • • Task: Prepare an income statement for Audi Company as of December 31. Solution Strategy: Use revenue, expenses, and net income to structure the income statement. Confirm that net income equals $3,000. Problem 1-4B: Preparing a Statement of Retained Earnings (P2) • • Task: Using the information from Problem 1-3B, prepare a statement of retained earnings for Audi Company. Solution Strategy: Calculate retained earnings by adjusting for net income and dividends, if any. Problem 1-5B: Preparing a Balance Sheet (P2) • • Task: Prepare Audi Company’s balance sheet for the year ended December 31. Solution Strategy: Ensure that the balance sheet balances by verifying total assets, total liabilities, and total equity. Problem 1-6B: Preparing a Statement of Cash Flows (P2) • • Task: Use the financial information of Banji Company to prepare a cash flow statement for the year ended December 31. Solution Strategy: Break down cash flows into operating, investing, and financing activities. Problem 1-7B: Analyzing Transactions and Preparing Financial Statements (P1, P2) • • Task: Analyze the effects of 14 transactions for Niko’s Maintenance Co. in June. Solution Strategy: 1. Create a table showing how each transaction affects the accounting equation. 2. Prepare the income statement, statement of retained earnings, balance sheet, and cash flow statement for June. Problem 1-8B: Analyzing Effects of Transactions (P1, P2) • • Task: Neva Nadal started a new business and completed several transactions. You need to determine the effects on financial statements. Solution Strategy: 1. Analyze how each transaction affects assets, liabilities, and equity. 2. Compute net income based on revenue and expenses. Problem 1-9B: Analyzing Transactions and Preparing Financial Statements (P1, P2) • • Task: Rivera Roofing Company completed several transactions in July. Solution Strategy: 1. Record the effects of each transaction on the accounting equation. 2. Prepare the income statement, retained earnings statement, and balance sheet as of July 31. 3. Prepare the cash flow statement for July. 4. Analyze the effect of a modified financing condition. Problem 1-10B: Determining Expenses, Liabilities, Equity, and Return on Assets (A1, A2) • • Task: Analyze Ski-Doo Company’s financial data. Solution Strategy: 1. Compute return on assets (ROA) and assess whether it meets industry benchmarks. 2. Calculate total expenses, liabilities, and equity. Problem 1-11B: Computing and Interpreting Return on Assets (A2) • • Task: Compare AT&T and Verizon’s financials, compute return on assets, and analyze which company performs better. Solution Strategy: 1. Compute ROA for both companies. 2. Compare sales and return on assets. 3. Write a memorandum explaining investment recommendations.