20

Part

FinancialAccounting

report of status or stocks as of a moment of time, whereas the other two sratements sum_ marize flows over a period of time. In the United states, calculating taxable income for income tax purposes differs from the process of calcurating income for the financial accounting income statement. The basic accounting equation is Assets

Liabilities

Owners' eouitv

Problems
Problem 1-1.
S12,000 in cash, held g95,000 ofinventory,

$13,000. Charles Company also had boi_

Problem 1-2.

; :l#i'"T#T

ir#?:ffi:HffJ "' ",

l["ff: j]tlfiil,l.:lf
Current assets Noncurrent assets
Total assets

Selected balance sheet items are shown for the Microtech company. compute the missing rour vears' what basic accounting equation diJ you apply in makl

Year
?

Year 2

Year 3

$113,624

$?
198,014

Year 4

$ 85,124
162,011

$?
'l

$surtoo

Current liabilities Noncurrent liabilities

Paid-in capital Retained earnings Total liabilities and

$?
$
40,220
7

51

56,142
?

$? $?
60,1 00

,021

u?g/!l
$?
30,222 170,O00

214,15s
13,78s $524,600

173,295

170,000
1,452

(3,644)

2,350 $220,111

owners'equity Problem 1-3.

I?!!,41!

s7

tffi"rff m:ffiitNe

Selected income statement items are shown forAstrotech company. compute the missing rour vears' what basic accounting did you apply

"quution

in makl

(Hint'To estimate the year 4 missing numberc, compute the typical percentage each ex_ pense item is of sales foryears I to 3 anl apply the percentage r".h expense item to Year 4's sales.)

d;;; ;;

Year
Sa les

1
1

Year 2

Year 3
$1

Cost of goods sold Cross margin

$12,01
3,01
?

$?
2,992

Year 4
$ 1 0,000 ')

1,54s

)
8,659
?

Other expenses Profit before taxes

Tax expense

. 6,201
2,799
?

9,976
6,429

)
?

)
't,019

Net income

$ 16.9

qLzq

zt505 945

$ 1,418

Chapter

The Nattu"e and PtLrpose oJ'Atr:ounting 2'l

Problem 1-4.

An analysis of the transactions made by Acme Consulting for the month of July is shown
below.

Cash + $20,000

+ Accounts +
Receivable

SuPPlies

Equipment

= Accounts +
Pavable

Owners'
+ $20,000

Description of
Transaction
lnvestment

-$ 5,000 -$ 1,000 -$ 4,500

+$

+ $ 7,000

+$2,000

+$1,000 +$5,000

5,000

$ 4,500 +$10,000 -$1,s00

Sa la

ries

Revenues

-$ 1,s00 -r$ 1,000 $ 750 -$ s00

$1

,000

+$

200

-$
Required: a. Explain

200

$ $ -$ -$

750 500

Rent

Utilities
Travel

200 200

each transaction.

b. List the changes in the company's balance sheet during the month of July. c. PreDare an income statement for the month (ignore taxes)' d. Explain the changes in the Cash account. e. Explain why the change in the Cash account and the month's income are not the same.
Problem 1-5.
During the month of June, Bon voyage Travel recorded the following transactions:

1. Owners invested $25,000 in cash to start the business. They received common stock. 2. The month's rent of $500 was prepaid in cash.

3. Equipment costing 58,000 was bought on credit. 4. 5500 was paid for office suPPlies. 5. Advertising costing $750 was paid for with cash' 6. Paid $3,000 employee salaries in cash. 7. Earned travel commissions of $ I 0,000 of which $2,000 was received in 8. Paid $5,000 of the $8,000 owed to the equipment supplier' 9. Used $100 of the office suPPlies.
10. Charged Si,000 ofmiscellaneous expenses on the corporate credit card.

cash.

Required: a. prepare an analysis of the month's transactions using the same tabular format
shown in Problem l- 4 tignore taxes)

as

b. Ex.plain how the transactions during the month changed the basic accounting equaOwners' equity) for the company' c. Prepare an income statement for the month' d. Explain the changes in the Cash account. e. Explain why the change in the Cash account and the month's income are not the

tion (Assets

Liabilities

same.