Group work FA 1_Principle of Accounting_UEH 2021 PDF

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homework principle of accounting ueh 2021-2022- mandatory assignment...

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1. Meg McKinney opened a public relations firm called Solid Gold on August 1, 2018. The following amounts summarize her business on August 31, 2018:

During September 2018, the business completed the following transactions: a. Meg McKinney contributed $17,000 cash in exchange for capital. b. Performed service for a client and received cash of $800. c. Paid off the beginning balance of accounts payable. d. Purchased office supplies from OfficeMax on account, $1,200. e. Collected cash from a customer on account, $2,000. f. McKinney withdrew $1,600. g. Consulted for a new band and billed the client for services rendered, $4,500. h. Recorded the following business expenses for the month: Paid office rent: $1,000. Paid advertising: $500.

Cash

+

ASSETS Accounts + Receivable

+17,000 +800 -5,000 +2,000 -1,600

= Office Supplies

+

Land

=

LIABILITIES Accounts Payable

+ +

McKinney, Capital

–

McKinney, Withdrawals

+

EQUITY Service Revenue

+17,000 +800 +1,200

-5,000 +1,200

-2,000 -1,600 +4,500

+4,500

–

Rent Expense

–

Advertising Expense

-1,000 -500

-1,000 -500

13,600 +5,700

+1,200

+15,000

+1,200

+28,900

-1,600

+8,500

35,500 35,500 2. Cash $21,500 Conner Thomas started a new business, Thomas Gymnastics, and completed the following transactions during December: Dec. 1 2 5 9 10 15 20 25 28 28 30 31

Thomas contributed $19,000 cash in exchange for capital. Received $3,800 cash from customers for services performed. Paid $200 cash for office supplies. Performed services for a customer and billed the customer for services rendered, $4,500. Received $200 invoice for utilities due in two weeks. Paid for advertising in the local paper, $250. Paid utility invoice received on December 10. Collected cash in full from customer billed on December 9. Paid rent for the month, $1,600. Paid $1,450 to assistant for wages. Received $1,400 cash from customers for services performed. Thomas withdrew $3,500.

-1,000

-500

ASSETS Accounts + Receivable

Cash +19,000 +3,800 -200

= LIABILITIES +

Office Supplies

+

Accounts Payable

=

+

EQUITY Thomas, Capital

–

Thomas, Withdrawals

+

Service Revenue

–

Rent Expense

–

Advertising Expense

Salaries Expense

+19,000 +3,800 +200 +4,500

+4,500 +200

-250 -200 +4,500 -1,600 -1,450 +1,400 -3,500

Utility Expense

-200 -250

-200 -4,500 -1,600 -1,450 +1,400 -3,500

$21,500

+$0

+200

+$0

+$19,000

-$3,500

+$9,700

$21,700

-$1,600

$21,700

3. Net Income $115,700 Presented here are the accounts of Hometown Décor Company for the year ended December 31, 2018. Land Notes Payable Property Tax Expense Hunt, Withdrawals Rent Expense

$ 13,000 33,000 2,800 36,000 14,000

Owner contribution, 2018

$ 28,000

Accounts Payable Accounts Receivable Advertising Expense Building

14,000 800 17,000 170,400

-$250 -$200

-$1,450

Salaries Expense Salaries Payable Service Revenue Office Supplies Hunt, Capital, Dec. 31, 2017

67,000 1,300 225,000 8,000 56,000

Cash Equipment Insurance Expense Interest Expense

2,800 17,000 1,700 6,800

Requirements 1. Prepare Hometown Décor Company’s income statement. Example: HOMETOWN DÉCOR COMPANY Income Statement Year Ended December 31, 2018 Revenue: Service Revenue Expenses: Salaries Expense Advertising Expense Rent Expense Interest Expense Property Tax Expense Insurance Expense Total Expenses Net Income

2. Prepare the statement of owner’s equity.

$ 225,000 $ 67,000 17,000 14,000 6,800 2,800 1,700 109,300 $ 115,700

HOMETOWN DÉCOR COMPANY Owner’s Equity Statement Year Ended December 31, 2018 Revenue: Hunt’s Capital Dec 31,2017 Add: Net income Less: Withdrawals Hunt’s Capital Dec 31,2018

$ 56,000 $115,700 $171,700 $36,000 $135,700

3. Prepare the balance sheet. 4. Let’s examine a case using Greg’s Tunes and Sal’s Silly Songs. It is now the end of the first year of operations, and both owners want to know how well each business came out at the end of the year. Neither business kept complete accounting records, and neither owner made any withdrawals. The businesses throw together the data shown on the next page at year-end:

To gain information for evaluating the businesses, the owners ask you several questions. For each answer, you must show your work to convince the owners that you know what you are talking about. Requirements 1. Which business has more assets? 2. Which business owes more to creditors? 3. Which business has more owner’s equity at the end of the year? 4. Which business brought in more revenue? 5. Which business is more profitable? 6. Which of the foregoing questions do you think is most important for evaluating these two businesses? Why? 7. Which business looks better from a financial standpoint? 1. Sal’s Silly Songs:total assets $23,000 Greg’s tunes:

Total assets = total liabilities + owner contribution + net income = 10,000 + 6,000 + 9,000 = $25,000  Greg’s Tunes has more assets ($25,000 > $23,000) 2. Grey’s Tunes owes $10,000 to creditors Sal’s Silly Songs: Total creditors = total assets – (owner contribution + revenues – expenses) (liabilities) = 23,000 – ( 8,000 + 35,000 – 22,000 ) = $2000  Grey’s Tunes owes more to the creditors 3. Sal’s Silly: owner’s equity = owner contribution + net income = owner contribution + revenues – expenses = 8,000 + 35,000 - 22,000 = $21,000 Grey’s Tunes: owner’s equity = owner contribution + net income = 6,000 + 9,000 = $15,000  Sal’s Silly has more owner’s equity at the end of the year. 4. Sal’s Silly : revenues = $35,000 Grey’s Tune : revenues = net income + expenses = 9,000 + 44,000 = $53,000 Grey’s Tune brought in more revenues 5. Sal’s Silly : net income = revenues – expenses = 35,000 – 22,000 = $13,000 Grey’s Tune : net income = $9,000  Sal’s Silly is more profitable 6. I think the most important question for evaluating these two business is “ which business has more owner’s equity at the end of the year?”. Because which business has more equity synonymous with has more profits to keep operating the business. 7. From a financial standpoint, Sal’s Silly looks better because: - It owes less to creditors. - It has more owner’s equity at the end of the year. - It is more profitable ( has more net income )....