Chapter 1: Problem Set A

Problem 1-1A: Identifying Effects of Transactions on Financial Statements For each transaction, we will determine the impact on the balance sheet, income statement, and statement of cash flows. Transaction 1. Owner invests $40,000 cash 2. Rent office for $2,200 cash 3. Purchased equipment on credit for $1,890 4. Paid $750 cash for cleaning services 5. Collected $5,400 for consulting services 6. Provided services on credit for $2,500 7. Paid $750 cash for assistant's salary 8. Received $2,500 payment for services provided 9. Provided services on credit for $3,200 10. Paid $1,400 dividend Total Total Total Net Operating Investing Financing Assets Liabilities Equity Income Cash Flow Cash Flow Cash Flow +40,000 +40,000 -2,200 -2,200 +1,890 +40,000 -2,200 -2,200 +1,890 -1,890 -750 -750 -750 +5,400 +5,400 +5,400 +5,400 +2,500 +2,500 +2,500 -750 -750 -750 +2,500 -750 -750 +2,500 +3,200 +3,200 -1,400 -1,400 +3,200 -1,400 Problem 1-2A: Computing Missing Information Company A 1. Beginning Equity = Assets - Liabilities = $78,000 - $38,000 = $40,000 2. Ending Equity = Ending Assets - Ending Liabilities = $82,000 - $40,500 = $41,500 3. Liabilities at End of Year = Assets - Equity = $82,000 - $41,500 = $40,500 Company B 1. Beginning Equity = Assets - Liabilities = $53,000 - $23,500 = $29,500 2. Ending Equity = Assets - Liabilities = $56,875 - $24,875 = $32,000 3. Net Income = Ending Equity - Beginning Equity = $32,000 - $29,500 = $1,600 Problem 1-3A: Preparing an Income Statement Armani Company Income Statement for the Year Ended December 31 Revenues Consulting Revenue Total Revenues $50,000 $50,000 Expenses Rent Expense $10,000 Salaries Expense $20,000 Utilities Expense $5,000 Miscellaneous Expense $0 $35,000 Total Expenses Net Income $15,000 Problem 1-4A: Preparing a Statement of Retained Earnings Armani Company Statement of Retained Earnings for the Year Ended December 31 Beginning Retained Earnings $5,000 Plus: Net Income $15,000 Less: Dividends $3,000 Ending Retained Earnings $17,000 Problem 1-5A: Preparing a Balance Sheet Armani Company Balance Sheet as of December 31 Assets Cash $8,000 Accounts Receivable $4,000 Equipment $30,000 Total Assets $42,000 Liabilities Accounts Payable $10,000 Total Liabilities $10,000 Equity Common Stock $15,000 Equity Retained Earnings $17,000 Total Equity $32,000 | Total Liabilities & Equity| $42,000 | Problem 1-6A: Preparing a Statement of Cash Flows Kia Company Statement of Cash Flows for the Year Ended December 31 Cash Flows from Operating Activities Cash received from customers $7,500 Cash paid for rent -$2,000 Cash paid for salaries -$3,000 Net Cash from Operating Activities $2,500 Cash Flows from Investing Activities Purchase of Equipment -$1,500 Cash Flows from Financing Activities Owner Investment $2,500 Dividends Paid -$500 Net Cash from Financing Activities $2,000 | Net Increase in Cash | $3,000| | Beginning Cash Balance | $500 | | Ending Cash Balance | $3,500| Problem 1-7A: Gabi Gram’s Financial Statements Income Statement Revenues $11,100 Expenses Rent $2,200 Salaries $1,500 Cleaning Service $750 Utilities $280 Telephone $300 Total Expenses $5,030 Net Income $6,070 Statement of Retained Earnings Beginning Retained Earnings $0 Plus: Net Income $6,070 Less: Dividends $1,400 Ending Retained Earnings $4,670 Balance Sheet Assets Cash $42,780 Equipment $1,890 Accounts Receivable $3,200 Total Assets $47,870 Liabilities Accounts Payable $80 Total Liabilities $80 Equity Common Stock $40,000 Retained Earnings $4,670 Total Equity $44,670