Chapter 2 (exercises) - ejercicios terminados PDF

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Chapter 2 The Accounting Equation Exercises

Main lecturer: Encarna Guillamon Saorin [email protected] 1-1

EXERCISE 2-1 Compute the missing amount in the accounting equation for each entity (amounts in million $): Assets Company A Company B

3.3

Company C

49

Liabilities

Owners' Equity

67

19 0.9

35 1-2

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EXERCISE 2-2 Classify the following items as an Asset (A), a Liability (L), or an Owners' Equity (E): a) Accounts payable L g) Cash A b) Common stock E h) Long-term debt L c) Receivables A i) Merchandise inventory A d) Retained earnings E j) Notes payable L e) Land A k) Accrued expenses L f) Prepaid expenses payable A bc was paid, now brings benefit in the future l) Equipment A

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EXERCISE 2-3 Calculate thePaid-in capitalof the following corporation contributed by the founders: Number of shares Shareholder A

20,000

Shareholder B

5,000

Shareholder C

25,000

Par value of shares: 6.00 € 1-4

SHAREHOLDER A. PAID IN CAPITAL=20K x 6=120K SHAREHOLDER B. P-I-C=5K x 6= 30K SHAREHOLDER C P-I-C=25K x 6= 150K

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EXERCISE 2-4 • Miller Water Systems began the year 2014 with retained earnings of $60,000 • Revenues during the year were $600,000, and expenses totaled $530,000 • Miller declared and paid dividends of $30,000 • What was the company's ending balance of retained earnings? 100K

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EXERCISE 2-5 • Johnson & Johnson began the year with total assets of $12.2 billion and total liabilities of $6.7 billion • Net income for the year was $2.0 billion • Dividends totaled $0.4 billion • How much is stockholders' equity at the end of the year? 7.1 billion 1-6

EXERCISE 2-6 • Balances of the assets and liabilities of Home Depot, Inc. as of January 31, 2014, are (in million $): Sales revenue Property & equipment Accounts receivable

30,219 8,532 469

Other expenses Cost of goods sold Cash

1,650 21,614 62

Merchandise inventory

4,402

Operating expenses

5,341

Accounts payable

1,586

R.E., beginning

4,430

Other liabilities

3,139

R.E., ending

Common stock

2,864

?

• Prepare the income statement of Home Depot, Inc., for the year ended January 31, 2014 SALES.

30,219

COST OF GOOD SOLD

21,614

PROFIT CASH OP EXPENSES

8,605 62 5 341

5

ASSETS PROPERTY AND EQUIPMENT

8,532

MERCHANDISE INVENTORY

4,402

ACCOUNTS RECEIVABLE

469

TOTAL ASSETS.

13,403

LIABILITIES

Accounts payable

1,586

Other liabilities

3,139

TOTAL LIABILITIES

4,725

EQUITY

8,678

RE EARNINGS.

4,430

COMMON STOCK.

2,864

EXERCISE 2-7 • Kink's Copy Service, Inc., ended the month of July 2015, with these data (in $): Cash balance (July 1st) Cash balance (July 31st) Cash receipts: Collections from clients

950 6,200 1,900

Payments of cash: Purchase of equipment 30,000 Dividends 1,200 Payments to suppliers 450

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Issuance of stock 35,000 Rent expense 700 Common stock 35,000

R.E. (July 1st ) 100 Dividends 1,200 R.E. (July 31 st) ? Equipment 30,000 Service revenue 2,400 Office supplies 1,200 Utilities expense 200 Accounts payable 2,000

• Prepare the income statement and the statement of retained earnings of Kink's Copy Service, Inc., for July 20151-8

EXERCISE 2-8 • At December 31, 2014, Miller Water Systems has cash of $13,000,

receivables of $2,000, and inventory of $25,000 • The company's land, buildings, and equipment total

$110,000, and other assets amount to $10,000 • Miller owes accounts payable of $8,000 and shortterm notes payable of $12,000 and also has a longterm debt of $80,000 • Common stock is $15,000 • Prepare Miller Water Systems' balance sheet at

December 31, 2014 BALANCE SHEET FOR MILLER WATER SYSTEMS Year end 31 Dec 2014 ASSETS SHORT TERM CASH

13,000

RECEIVABLES

2,000

INVENTORY

25,000

TOTAL ST

40,000

LONG TERM LAND BUILDINGS AND EQUIPMENT OTHERS

110,000 10,000

TOTAL LT

120,000

TOTAL ASSETS

160,000

LIABILITES SHORT TERM ACCOUNT PAYABLE SHORT TERM PAYABLES

8,000 12,000

LONG TERM LONG TERM PAYABLES TOTAL LIABILITIES

80,000 100,000

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EXERCISE-92 • Refer to the data in the preceding Exercise 2-7 regarding Kink’s Copy Service, Inc. balance sheet of Kink's Copy • Prepare the Service, Inc., at July 31, 2015

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EXERCISE 2-10 Identify each item with its appropriate financial statement: Income statement (IS), Statement of retained earnings (SRE), Balance sheet (BS), and Statement of cash flows (SCF) (Four items appear on two financial statements) 1. Dividends SCF/SER NOTBS BC IT HAS BEEN PAID 2. Depreciation expense IS 3. Inventory BS 4. Sales revenue IS 5. Retained earnings SRE/BS 6. Operating cash flows SCF 7. Net income / net loss IS/SRE

8.

Cash BS/SCF

Cash flows from financing Activities SCF 10. Accounts payable BS 11. Common stock BS NO NOT T SCF, UNLESS SPECIFIED 12. Interest revenue IS 9.

13. Long-term debt BS

14. Increase/decrease in cash SCF

EXERCISE 2-11 • The assets and liabilities, and revenues and expenses of Liberty Corporation for the year 2014 are (in million $): Land 98,000 Salary expense 63,000 Accounts payable 19,000 Common stock 100,000 Notes payable 85,000 Salary payable 1,000 Accounts receivable 12,000 Furniture 20,000 Property tax expense 4,000 Service revenue 180,000 Advertising expense 13,000 Interest expense 9,000

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Rent expense 23,000 Supplies 3,000 Building 110,000 R.E.,

beginning 50,000 Cash

10,000

Dividends

70,000

• Prepare the income statement, the statement of retained earnings and the balance sheet of Liberty for the year 20141-12

EXERCISE 2-12 On August 1, 2015, Sarah Brown invested $90, 000 in her new busines rown Construction. During August, she withdrew $10, 000 from the business. The amounts of the various assets, liabilities, revenues, and expenses are as follows: Accounts payable Accounts receivable Cash Construction revenue Prepaid Insurance Land Miscellaneous expense Insurance expense Rent expense Salary expense Supplies Supplies expense Utilities expense

$ 9, 000 26, 000 5, 400 80, 000 2, 000 75, 000 1, 400 2, 000 7, 000 46, 000 900 300 3, 000

Prepare each of the following for Brown Construction Company: a. an income statement for August, b. a statement of owner's equity for August, and c. a balance sheet as of August 31.

NET INCOME 20.3 TOT ASSETS 109.3

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