John J Wild, Ken W. Shaw, Barbara Chiappetta
7th Edition · 1096 pages
Chapter 1: 7PSA_1 (page 39)
URL copied to clipboard! Now share some education!Gabi Gram started The Gram Co., a new business that began operations on May 1. The Gram Co. completed the following transactions during its first month of operations.
May 1 G. Gram invested \(40,000 cash in the company in exchange for its common stock.
1 The company rented a furnished office and paid \)2,200 cash for May’s rent.
3 The company purchased \(1,890 of office equipment on credit.
5 The company paid \)750 cash for this month’s cleaning services.
8 The company provided consulting services for a client and immediately collected \(5,400 cash.
12 The company provided \)2,500 of consulting services for a client on credit.
15 The company paid \(750 cash for an assistant’s salary for the first half of this month.
20 The company received \)2,500 cash payment for the services provided on May 12.
22 The company provided \(3,200 of consulting services on credit.
25 The company received \)3,200 cash payment for the services provided on May 22.
26 The company paid \(1,890 cash for the office equipment purchased on May 3.
27 The company purchased \)80 of advertising in this month’s (May) local paper on credit; cash payment is due June 1.
28 The company paid \(750 cash for an assistant’s salary for the second half of this month.
30 The company paid \)300 cash for this month’s telephone bill.
30 The company paid \(280 cash for this month’s utilities.
31 The company paid \)1,400 cash in dividends to the owner (sole shareholder).
Required 1. Create the following table similar to the one in Exhibit 1.9.
Enter the effects of each transaction on the accounts of the accounting equation by recording dollar increases and decreases in the appropriate columns. Do not determine new account balances after each transaction. Determine the final total for each account and verify that the equation is in balance
The accounting equation is prepared, and assets are equal to the sum of liabilities and equity which is$44,790.
Assets = Liabilities + Equity $ 42 , 780 + $ 1 , 890 = $ 80 + $ 40 , 000 - $ 1 , 400 + $ 11 , 100 - $ 5 , 110 $ 44 , 670 = $ 44 , 670
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What information is reported in a balance sheet?
The following financial statement information is from five separate companies.
Company Company Company Company Company
December 31, 2016
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . \(54,000 \) 80,000 \(141,500 \)92,500 $144,000
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 60,000 68,500 51,500 ?
December 31, 2017
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,000 100,000 186,500 ? 170,000
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 36,000 ? 65,800 42,000 42,000
During year 2017
Stock issuances . . . . . . . . . . . . . . . . . . . 5,000 20,000 ? 48,100 60,000
Net income (or loss) . . . . . . . . . . . . . . . . ? 40,000 18,500 24,000 32,000
Cash dividends . . . . . . . . . . . . . . . . . . . 5,500 2,000 0 20,000 8,000
Required 1. Answer the following questions about Company V.
a. What is the amount of equity on December 31, 2016?
b. What is the amount of equity on December 31, 2017?
c. What is the net income or loss for the year 2017?
What events or transactions change equity?
The following describe several different business organizations. Determine whether each description best refers to a sole proprietorship (SP), partnership (P), or corporation (C).
a. Micah and Nancy own Financial Services, a financial services provider. Neither Micah nor Nancy has personal responsibility for the debts of Financial Services.
b. Riley and Kay own Speedy Packages, a courier service. Both are personally liable for the debts of the business.
c. IBC Services does not have separate legal existence apart from the one person who owns it.
d. Trent Company is owned by Trent Malone, who is personally liable for the company’s debts.
e. Ownership of Zander Company is divided into 1,000 shares of stock.
f. Physio Products does not pay income taxes and has one owner.
g. AJ Company pays its own income taxes and has two owners.
Sanyu Sony started a new business and completed these transactions during December.
Dec. 1 Sanyu Sony transferred \(65000 cash from a personal savings account to a checking account in the name of Sony Electric in exchange for its common stock.
2 The company rented office space and paid \)1000 cash for the December rent.
3 The company purchased \(13000 of electrical equipment by paying \)4800 cash and agreeing to pay the \(8200 balance in 30 days.
5 The company purchased office supplies by paying \)800 cash.
6 The company completed electrical work and immediately collected \(1200 cash for these services.
8 The company purchased \)2530 of office equipment on credit.
15 The company completed electrical work on credit in the amount of \(5000.
18 The company purchased \)350 of office supplies on credit.
20 The company paid \(2530 cash for the office equipment purchased on December 8.
24 The company billed a client \)900 for electrical work completed; the balance is due in 30 days.
28 The company received \(5000 cash for the work completed on December 15.
29 The company paid the assistant’s salary of \)1400 cash for this month.
30 The company paid \(540 cash for this month’s utility bill.
31 The company paid \)950 cash in dividends to the owner (sole shareholder).
Required Analysis Component 4. Assume that the owner investment transaction on December 1 was \(49,000 cash instead of \)65,000 and that Sony Electric obtained another $16,000 in cash by borrowing it from a bank. Compute the dollar effect of this change on the month-end amounts for (a) total assets, (b) total liabilities, and (c) total equity.
