(Solution Manual) Principles of Financial Accounting (Chapters 1-17)

Wild,Shaw, 25

Business

Solution Manual

25th Edition

• $15.00 $50.00

---

Description

Solution Manual for Principles of Financial Accounting (Chapters 1-17), The downloadable file consists of 1116 pages, and the total size of the file is 7.08 MB. Purchase now only for highly discounted price.

Author(s): Wild, Shaw

---

---

Study Note Preview

1 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Chapter 1 Accounting in Business QUICK STUDIES Quick Study 1 -1 (10 minutes) 1. f Artificial Intelligence 2. c Recording 3. h Recordkeeping (bookkeeping) Quick Study 1 -2 (10 minutes) a. External user g. External user b. External user h. External user c. External user i. Internal user d. External user j. External user e. Internal user k. External user f. External user l. External user Quick Study 1 -3 (10 minutes) 1. Opportunity 2. Pressure 3. Rationalization 4. Opportunity 5. Pressure 6. Rationalization Quick Study 1 -4 (5 minutes) 1. Principle 2. Assumption 3. Assumption 4. Principle 1 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Quick Study 1 -5 (10 minutes) Attribute Present Proprietorship Partnership Corporation LLC 1. Business taxed no no yes no 2. Limited liability no no yes yes 3. Legal entity no no yes yes Quick Study 1 -6 (10 minutes) 1. Revenue recognition principle 2. Measurement (c ost) principle 3. Business entity assumption Quick Study 1 -7 (5 minutes) Assets = Liabilities + Equity $700,000 (a) $280,000 $420,000 $500,000 (b) $250,000 (b) $250,000 Quick Study 1 -8 (10 minutes) 1. Assets = Liabilities + Equity $75,000 (a) $35,000 $40,000 (b) $95,000 $25,000 $70,000 $85,000 $20,000 (c) $65,000 2. Assets = Liabilities + Owner, Capital - Owner, Withdrawals + Revenues - Expenses $40,000 $16,000 $20,000 $ 0 (a) $12,000 $ 8,000 $80,000 $32,000 $44,000 (b) $2,000 $24,000 $18,000 2 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Quick Study 1 -9 (5 minutes) a. Increase b. Decrease c. Increase d. Decrease Quick Study 1 -10 (15 minutes) Assets = Liabilities + Equity Cash + Accounts Recble. = Accounts Payable + Owner, Capital - Owner, Withdrawals + Revenues - Expenses (a) $5,500 = $5,500 Consulting (b) + $4,000 = + 4,000 Commission Bal. 5,500 + 4,000 = + 9,500 (c) -1,400 = - $1,400 Wages Bal. 4,100 + 4,000 = + 9,500 - 1,400 (d) +1,000 + - 1,000 = - Bal. 5,100 + 3,000 = + 9,500 - 1,400 (e) -700 + = - 700 Cleaning Bal. $4,400 + $3,000 = + $9,500 - $2,100 3 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Quick Study 1 -11 (15 minutes) Assets = Liabilities + Equity Cash + Supplies + Equip. + Land = Accts. Pay. + Owner, Capital - Owner, With - drawals + Rev. - Exp. (a) $15,000 = $15,000 (b) -500 + $500 = Bal. 14,500 + 500 = + 15,000 (c) + $10,000 = 10,000 Bal. 14,500 + 500 + 10,000 = + 25,000 (d) + 200 = +$200 Bal. 14,500 + 700 + 10,000 = 200 + 25,000 (e) -9,000 + $9,000 = Bal. $5,500 + $700 + $10,000 + $9,000 = $200 + $25,000 Quick Study 1 -12 (10 minutes) a. Balance sheet e. Balance sheet b. Statement of cash flows f. Statement of cash flows c. Balance sheet g. Income statement d. Income statement h. Balance sheet 4 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Quick Study 1 -13 (5 minutes) 1. Expenses 4. Withdrawals 7. Expenses 2. Revenues 5. Expenses 8. Revenues 3. Expenses 6. Revenues Quick study 1 -14 (5 minutes) 1. Assets 3. Assets 5. Assets 2. Liabilities 4. Liabilities 6. Assets Quick Study 1-15 (15 minutes) HAWKIN Income Statement For Month Ended December 31 Revenues Services revenue ................................ $16,000 Expenses Wages expense ................................ ... $8,000 Rent expense ................................ ....... 1,500 Utilities expense ................................ .. 700 Total expenses ................................ .... 10,200 Net income ................................ .................. $ 5,800 Quick Study 1 -16 (15 minutes) HAWKIN Statement of Owner’s Equity For Month Ended December 31 Hawkin, Capital , December 1 .......................... $10,900 Add: Investments by owner ....................... 0 Net income ................................ ......... 5,800 16,700 Less: Withdrawals by owner ...................... (1,000) Hawkin, Capital , December 31 ........................ $15,700 5 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Quick Study 1-17 (15 minutes) HAWKIN Balance Sheet December 31 Assets Liabilities Cash ............................... $ 5,100 Accounts payable ................. $ 6,000 Accounts receivable .... 600 Supplies ........................ 2,000 Equity Equipment ..................... 14,000 Hawkin, Capital ..................... 15,700 Total assets ................... $21,700 Total liabilities and equity .... $21,700 Quick Study 1-18 (15 minutes) STUDIO ONE Statement of Cash Flows For Month Ended December 31 Cash flows from operating activities Cash received from customers ................................ .. $23,50 0 Cash paid for expenditures ................................ ........ (6,000) Net cash provided by operating activities ................ 17,500 Cash flows from investing activities Cash paid for equipment ................................ ............ (3,000) Cash paid for truck ................................ ...................... (22,000) Net cash used by investing activities ....................... (25,000) Cash flows from financing activities Cash i nvestments by owner ................................ ....... 11,000 Cash withdrawals by owner ................................ ....... (2,000 ) Net cash provided by financing activities ................ 9,000 Net increase in cash ................................ .................... $ 1,500 Cash balance, December 1 ................................ ......... 1,000 Cash balance, December 31 ................................ ....... $ 2,500 6 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Quick Study 1-19 (10 minutes) 1. Investing activities 2. Investing activities 3. Operating activities 4. Operating activities 5. Operating activities 6. Operating activities 7. Operating activities 8. Financing activities Quick Study 1 -20 (5 minutes) Improve Explanation : Deutsche Auto ’s return on assets increased in each of the years shown, which is a positive result . It suggests the company is more effectively using its assets to generate net income. Quick Study 1 -21 (10 minutes) a. Return on assets = = = 19.0% b. Better Explanation : The company ’s 19.0% return on assets exceeds the 11.0% return of its competitor. This is a positive result . It suggests the company is more effectively using its assets to generate net income in comparison to its competitor . $8 billion $42 billion Net income Average total assets 1 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. EXERCISES Exercise 1 -1 (10 minutes) 1. Communicating 5. Communicating 2. Communicating 6. Identifying 3. Recording 7. Identifying 4. Recording 8. Recording Exercise 1 -2 (20 minutes) Part A. 1. Internal user 5. Internal user 2. External user 6. External user 3. Internal user 7. Internal user 4. External user Part B. 1. Internal user 5. Internal user 2. Internal user 6. External user 3. External user 7. Internal user 4. External user 8. Internal user Exercise 1 -3 (10 minutes) 1. Managerial accounting 5. Tax accounting 2. Financial accounting 6. Tax accounting 3. Managerial accounting 7. Financial accounting 4. Managerial accounting 8. Financial accounting 2 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1 -4 (10 minutes) 1. A. Audit 2. G. Net income 3. D. FASB 4. F. Public accountants 5. C. Ethics Exercise 1 -5 (20 minutes) 1. E. Audit 2. D. Internal controls 3. C. Prevention 4. B. Fraud triangle 5. A. Ethics Exercise 1 -6 (10 minutes) a. Corporation e. Corporation b. Partnership f. Sole proprietorship c. Sole proprietorship g. Corporation d. Sole proprietorship h. Limited liability company 3 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1 -7 (10 minutes) Principle or Assumption a. Full disclosure principle b. Going -concern assumption c. Expense recognition (matching ) principle d. Business entity assumption e. Revenue recognition principle f. Measurement (c ost) principle Exercise 1-8 (15 minutes) a. $10,000 recorded for truck. Explanation : Accounting information is based on the measurement (cost) principle . This means for recording the asset’s amount, it makes no difference that the seller was asking a higher price or that the owner believe s the vehicle is worth more. b. Revenue recorded by month: May: $1,000 June: $0 July: $0 Explanation : Revenue recognition principle dictates that revenue is recognized when services are provided to customers , and not necessarily when customers pay for the services. In this case, all work was performed in May. Therefore, the revenue fo r this work is recorded in May. Exercise 1 -9 (10 minutes) Assets = Liabilities + Equity (a) $ 65,000 = $ 20,000 + $45,000 $100,000 = $ 34,000 + (b) $66,000 $154,000 = (c) $114,000 + $40,000 4 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1 -10 (20 minutes) a. Using the accounting equation at the beginning of the year: Assets = Liabilities + Equity $300,000 = ? + $100,000 Thus, beginning liabilities = $200,000 Using the accounting equation at the end of the year: Assets = Liabilities + Equity $300,000 + $80,000 = $200,000+ $50,000 + ? $380,000 = $250,000 + ? Thus, ending equity = $130,000 Alternative approach to solving part (b): Assets($80,000) = Liabilities($50,000) + Equity(?) where “” refers to “change in.” Thus: Ending Equity = $100,000 + $30,000 = $130,000 b. Using the accounting equation: Assets = Liabilities + Equity $123,000 = $47,000 + ? Thus, equity = $76,000 c. Using the accounting equation at the end of the year: Assets = Liabilities + Equity $190,000 = $70,000 - $5,000 + ? $190,000 = $65,000 + $125,000 Using the accounting equation at the beginning of the year: Assets = Liabilities + Equity $190,000 - $60,000 = $70,000 + ? $130,000 = $70,000 + ? Thus : Beginning Equity = $60,000 5 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1 -11 (15 minutes) a. Using the accounting equation on January 1 : Assets = Liabilities + Equity ? = $60,000 + $40,000 Thus, beginning assets = $1 00,000 Using the accounting equation on January 3 : Assets = Liabilities + Equity ? = $60,000 + $6,000 + $40,000 ? = $66,000 + $40,000 Thus, January 3 assets = $106 ,000 Alternatively, we begin with $100,000 in assets, then add $10,000 in solar panels, then subtract $4,000 in cash →resulting in $106,000 in ending assets. b. Using the accounting equation on March 1 : Assets = Liabilities + Equity $100,000 = $30,000 + ? Thus, beginning equity = $70,000 Using the accounting equation on March 5 : Assets = Liabilities + Equity $100,000 - $15,000 = $30,000 + ? $85,000 = $30,000 + ? Thus, March 5 equity = $55,000 c. Using the accounting equation on August 1 : Assets = Liabilities + Equity $30,000 = $10,000 + ? Thus, beginning equity = $20,000 Using the accounting equation on August 5 : Assets = Liabilities + Equity $30,000 + $10,000 = $10,000 + ? $40,000 = $10,000 + ? Thus, August 5 equity = $30,000 6 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1 -12 (20 minutes) 1. d. The owner invested $40,000 cash in the business. 2. e. The company purchased supplies for $3,000 by paying $2,000 cash and putting $1,000 on credit. 3. a. The company purchased equipment for $8,000 cash. 4. f. The company billed a customer $6,000 for services provided. 5. h. The company provided services for $1,000 cash . Exercise 1 -13 (20 minutes) 1. f. The company purchased land for $4,000 cash. 2. a. The company purchased $1,000 of supplies on credit. 3. g. The company billed a client $1,900 for services provided. 4. h. The company paid $1,000 cash toward an account payable . 5. b. The company collected $1,900 cash from an account receivable. Exercise 1 -14 (15 minutes) a. 3. Decreases an asset and decreases a liability. b. 2. Increases an asset and increases a liability. c. 5. Increases an asset and increases equity. d. 1. Decreases an asset and decreases equity. e. 4. Increases an asset and decreases an asset. f. 5. Increases an asset and increases equity. 7 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1 -15 (30 minutes) Assets = Liabilities + Equity Cash + Accounts Receivable + Equip - ment = Accounts Payable + M. Chen, Capital – M. Chen, Withdrawals + Revenue s – Expenses a. +$60,000 + $15,000 = + $75,000 b. – 1,500 ______ ______ – $1,500 Bal. 58,500 + + 15,000 = + 75,000 – 1,500 c. _______ + 10,000 +$10,000 ______ _____ Bal. 58,500 + + 25,000 = 10,000 + 75,000 – 1,500 d. + 2,500 ______ _______ ______ + $2,500 _____ Bal. 61,000 + + 25,000 = 10,000 + 75,000 + 2,500 – 1,500 e. _______ + $8,000 ______ _______ ______ + 8,000 _____ Bal. 61,000 + 8,000 + 25,000 = 10,000 + 75,000 + 10,500 – 1,500 f. – 6,000 ______ + 6,000 _______ ______ _____ _____ Bal. 55,000 + 8,000 + 31,000 = 10,000 + 75,000 + 10,500 – 1,500 g. – 3,000 ______ ______ _______ ______ _____ – 3,000 Bal. 52,000 + 8,000 + 31,000 = 10,000 + 75,000 + 10,500 – 4,500 h. + 5,000 - 5,000 ______ _______ ______ _____ _____ Bal. 57,000 + 3,000 + 31,000 = 10,000 + 75,000 + 10,500 – 4,500 i. – 10,000 ______ ______ – 10,000 ______ _____ _____ Bal. 47,000 + 3,000 + 31,000 = 0 + 75,000 + 10,500 – 4,500 j. – 1,000 ______ ______ _______ ______ – $1,000 _____ _____ Bal. $46,000 + $3,000 + $31,000 = $ 0 + $75,000 – $1,000 + $10,500 – $4,500 8 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1-16 (20 minutes) Equity: Beginning Ending Assets ................................ ... $50,000 $80,000 Liabilities .............................. (22,000) (35,000) Equity ................................ ... $28,000 $45,000 a. Net income for year: Equity, beginning of year ....................... $28,000 Plus owner investment s ......................... 3,000 Plus net income ................................ ....... ? Less owner withdrawal s ......................... (7,000) Equity, end of year ................................ .. $45,000 Therefore, net income must have been $21,000 b. Net income for year: Equity, beginning of year ....................... $28,000 Plus owner investments ......................... 15,000 Plus net income ................................ ....... ? Less owner withdrawals ......................... (0) Equity, end of year ................................ .. $45,000 Therefore, net income must have been $ 2,000 c. Net income for year: Equity, beginning of year ....................... $28,000 Plus owner investments ......................... 0 Plus net income ................................ ....... ? Less owner withdrawals ......................... (12,000) Equity, end of year ................................ .. $45,000 Therefore, net income must have been $29,000 9 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1-17 (20 minutes) a. Statement of Cash Flow Category b. Cash Inflow/Outflow 1. Cash flows from Operating Activities Cash Inflow 2. Cash flows from Financing Activities Cash Inflow 3. Cash flows from Operating Activities Cash Outflow 4. Cash flows from Investing Activities Cash Outflow 5. Cash flows from Operating Activities Cash Outflow 6. Cash flows from Financing Activities Cash Outflow Exercise 1 -18 (15 minutes) ERNST CONSULTING Income Statement For Month Ended December 31 Revenues Consulting revenue ............................ $14,000 Expenses Salaries expense ................................ . $7,000 Rent expense ................................ ....... 3,550 Telephone expense ............................. 760 Miscellaneous expenses .................... 580 Total expenses ................................ .... 11,890 Net income ................................ .................. $ 2,110 Exercise 1 -19 (15 minutes) ERNST CONSULTING Statement of Owner’s Equity For Month Ended December 31 J. Ernst, Capital , December 1 .......................... $ 0 Add: Investments by owner ....................... 84,000 Net income (from Exercise 1 -18) ........ 2,110 86,110 Less: Withdrawals by owner ...................... 2,000 J. Ernst, Capital , December 31 ........................ $84,110 10 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1 -20 (15 minutes) ERNST CONSULTING Balance Sheet December 31 Assets Liabilities Cash ............................... $11,360 Accounts payable ................. $ 8,500 Accounts receivable .... 14,000 Office supplies .............. 3,250 Office equipment .......... 18,000 Equity Land ............................... 46,000 J. Ernst, Capital * ................... 84,110 Total assets ................... $92,610 Total liabilities and equity .... $92,610 * For computation of this amount see Exercise 1 -19. Exercise 1 -21 (20 minutes) ERNST CONSULTING Statement of Cash Flows For Month Ended December 31 Cash flows from operating activities Cash received from customers ................................ .. $ 0 Cash paid to employeesa ................................ ............ (1,750) Cash paid for rent ................................ ........................ (3,550) Cash paid for telephone expenses ............................ (760) Cash paid for miscellaneous expenses .................... (580) Net cash used by operating activities ....................... ( 6,640) Cash flows from investing activities Cash paid for office equipment ................................ .. (18,000 ) Net cash used by investing activities ....................... (18,000) Cash flows from financing activities Cash i nvestments by owner ................................ ....... 38,000 Cash withdrawals by owner ................................ ....... (2,000 ) Net cash provided by financing activities ................ 36,000 Net increase in cash ................................ .................... $11,360 Cash balance, December 1 ................................ ......... 0 Cash balance, December 31 ................................ ....... $11,360 a $7,000 Salaries Expense - $5,250 still owed = $1,750 paid to employees. 11 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1-22 (15 minutes) a. JARVIS Statement of Owner’s Equity For Year Ended December 31, Year 1 Jarvis, Capital , January 1, Year 1 ................... $ 0 Add: Investments by owner ....................... 10,000 Net income ................................ ......... 30,000 40,000 Less: Withdrawals by owner ...................... (8,000) Jarvis, Capital , December 31, Year 1 .............. $32,000 b. JARVIS Statement of Owner’s Equity For Year Ended December 31, Year 2 Jarvis, Capital , December 31, Year 1 .............. $32,000 Add: Investments by owner ....................... 0 Net income ................................ ......... 50,000 82,000 Less: Withdrawals by owner ...................... (14,000) Jarvis, Capital , December 31, Year 2 .............. $68,000 12 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1-23 (25 minutes) a. TERRELL CO Income Statement For Year Ended December 31 Revenues Services revenue ................................ $48,000 Rent revenue ................................ ....... 9,000 Total revenue ................................ ....... $57,000 Expenses Salaries expense ................................ . 37,000 Advertising expense ........................... 3,000 Utilities expenses ................................ 1,000 Total expenses ................................ .... 41,000 Net income ................................ .................. $16,000 b. TERRELL CO Statement of Owner’s Equity For Year Ended December 31 Terrell, Capital , January 1 ................................ $ 0 Add: Investments by owner ....................... 22,000 Net income ................................ ......... 16,000 38,000 Less: Withdrawals by owner ...................... (5,000) Terrell, Capital , December 31 .......................... $33,000 13 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Exercise 1-24 (25 minutes) a. MAHOMES CO Statement of Owner’s Equity For Year Ended December 31 Mahomes, Capital , January 1 .......................... $ 0 Add: Investments by owner ....................... 15,000 Net income ................................ ......... 60,000 75,000 Less: Withdrawals by owner ...................... (22,000) Mahomes, Capital , December 31 .................... $53,000 b. MAHOMES CO Balance Sheet December 31 Assets Liabilities Cash ............................... $ 6,000 Accounts payable ................. $ 3,000 Accounts receivable .... 7,000 Equipment ..................... 9,000 Equity Land ............................... 34,000 Mahomes, Capital ................. 53,000 Total assets ................... $56,000 Total liabilities and equity .... $56,000 Exercise 1 -25 (10 minutes) Return on assets = Net income / Average total assets = $40,000 / [($200,000 + $300,000)/2] = 16.0% Better than competitors. Explanation: Swiss Group’s return on assets of 16% is markedly better than the 11% return of its competitors. Accordingly, its performance is assessed as superior to its competitors. 14 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. PROBLEM SET A Problem 1 -1A (25 minutes) a. b. Balance Sheet Income Statement Statement of Cash Flows Transaction Total Assets Total Liab. Total Equity Net Income Operating Activities Investi ng Activities Financi ng Activities 1 Owner invests $900 cash in business +900 +900 +900 2 Receives $700 cash for services provided +700 +700 +700 +700 3 Pays $500 cash for employee wages –500 –500 –500 –500 4 Buys $100 of equipment on credit +100 +100 5 Purchase s $200 supplies on credit +200 +200 6 Buys equipment for $300 cash +300 –300 –300 7 Pays $200 on accounts payable –200 –200 –200 8 Provides $400 services on credit +400 +400 +400 9 Owner withdraws $50 cash –50 –50 –50 10 Collects $400 cash on account receivable +400 –400 +400 15 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Problem 1 -2A (40 minutes) Part 1 Company A (a) Equity at beginning of year : Assets ................................ .......................... $55,000 Liabilities ................................ ..................... (24,500 ) Equity ................................ .......................... $30,500 (b) Equity at end of year : Equity, beginning of year .......................... $30,500 Plus investments by owner ....................... 6,000 Plus net income ................................ .......... 8,500 Less withdrawals by owner ....................... (3,500 ) Equity, end of year ................................ .... $41,500 (c) Liabilities at end of year : Assets ................................ .......................... $58,000 Equity ................................ .......................... (41,500 ) Liabilities ................................ ..................... $16,500 Part 2 Company B (a) and (b) Equity: Beginning Ending Assets ................................ ... $34,000 $40,000 Liabilities .............................. (21,500 ) (26,500 ) Equity ................................ ... $12,500 $13,500 (c) Net income for year: Equity, beginning of year ....................... $12,500 Plus investments by owner .................... 1,400 Plus net income ................................ ....... ? Less withdrawals by owner .................... (2,000 ) Equity, end of year ................................ .. $13,500 Therefore, net income must have been $ 1,600 16 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Problem 1 -2A (Continued) Part 3 Company C First, compute the beginning balance of equity: Beginning of Year Assets ................................ .......................... $24,000 Liabilities ................................ ..................... ( 9,000 ) Equity ................................ .......................... $15,000 Next, find the ending balance of equity by completing this table: Equity, beginning of year .......................... $15,000 Plus investments by owner ....................... 9,750 Plus net income ................................ .......... 8,000 Less withdrawals by owner ....................... (5,875 ) Equity, end of year ................................ ..... $26,875 Finally, find the ending amount of assets by adding the ending balance of equity to the ending balance of liabilities: End of Year Liabilities ................................ ..................... $29,000 Equity ................................ .......................... 26,875 Assets ................................ .......................... $55,875 Part 4 Company D First, compute the beginning and ending equity balances: Beginning Ending Assets ................................ ...... $60,000 $85,000 Liabilities ................................ . (40,000 ) (24,000 ) Equity ................................ ...... $20,000 $61,000 Then, find the amount of owner investments during the year : Equity, beginning of year ............................ $20,000 Plus investments by owner ......................... ? Plus net income ................................ ............ 14,000 Less withdrawals by owner ......................... 0 Equity, end of year ................................ ....... $61,000 Thus, owner investments must have been ... $27,000 17 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Problem 1 -2A (Concluded ) Part 5 Company E First, compute the balance of equity at end of year : Assets ................................ .......................... $113,000 Liabilities ................................ ..................... (70,000 ) Equity ................................ .......................... $ 43,000 Next, find the beginning balance of equity as follows: Equity, beginning of year .......................... $ ? Plus investments by owner ....................... 6,500 Plus net income ................................ .......... 20,000 Less withdrawals by owner ....................... (11,000 ) Equity, end of year ................................ ..... $43,000 Thus, the beginning balance of equity is: $27,500 Finally, find the beginning amount of liabilities by subtracting the beginning balance of equity from the beginning balance of assets: Beginning of Year Assets ................................ .......................... $119,000 Equity ................................ .......................... (27,500 ) Liabilities ................................ ..................... $ 91,500 Problem 1 -3A (20 minutes) Armani Company Income Statement For Current Year Ended December 31 Revenues Consulting revenue .............................. $33,000 Rental revenue ................................ ...... 22,000 Total revenue s................................ ....... $55,000 Expenses Salaries expense ................................ ... 20,000 Rent expense ................................ ......... 12,000 Selling and administrative expense s .. 8,000 Total expenses ................................ ...... 40,000 Net income ................................ .................... $15,000 18 Copyright © 2021 by McGraw Hill. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill. Problem 1 -4A (20 minutes) Armani Company Statement of Owner’s Equity For Current Year Ended December 31 Armani, Capital , Dec. 31, prior year ................ $16,000 Add: Investments by owner ....................... 1,000 Net income (from Problem 1 -3A) ........... 15,000 32,000 Less: Withdrawals by owner ...................... 13,000 Armani, Capital , Dec. 31, current year ............ $19,000 Problem 1 -5A (20 minutes) Armani Company Balance Sheet December 31 Assets Liabilities Cash ............................... $10,000 Accounts payable ................. $11,000 Accounts receivable .... 9,000 Total liabilities ....................... 11,000 Supplies ........................ 7,000 Equity Equipment ..................... 4,000 Armani, Capital * .................... 19,000 Total assets ................... $30,000 Total liabilities and equity .... $30,000 * For computation of this amount see Problem 1 -4A. Problem 1 -6A (15 minutes) Kia Company Statement of Cash Flows For Current Year Ended December 31 Cash from operating activities ........................ $ 6,000 Cash used by investing activities .................... (2,000) Cash used by financing activities .................... (2,800 ) Net increase in cash ................................ .......... $ 1,200 Cash, December 31, prior year ......................... 2,300 Cash, December 31, current year .................... $ 3,500