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ACCT 1005 - FINANCIAL ACCOUNTING

Worksheet 1 Accounting & the Business Environment

Practice Questions- Selected Solutions

Question 1

Part a)
1) Deposited $25,000 cash into the businesss bank account.
2) Provided service on account, $2,400
3) Purchased equipment on account, $10,000
4) Collected cash from a customer on account, $150
5) Purchased equipment for cash, $400
6) Payment on account, $8,000
7) Provided service for cash, $900
8) Paid expense, $2,000

Part b)
Net Income = $(2,400 + 900) - $2,000
= $1,300

Question 2
i) Ciliotta Design Studio
Income Statement
Year Ended December 31, 20X7
Revenue:
Service Revenue $158,100
Expenses:
Salary Expense $60,000
Rent Expense 24,000
Utilities Expense 6,800
Supplies Expense 4,000
Property Tax Expense 1,200
Total Expenses (96,000)
Net Income $62,100

ii) Beginning OE + AI + Net Income - Withdrawals = Ending OE


Withdrawals = Beginning OE + AI + Net Income Ending OE
= $(0 + 15,000 + 62,100 27,100)
= $50,000

Mona School of Business & Management, University of the West Indies at Mona -1-
Question 3
Lone Star Landscaping
Balance Sheet
July 31, 20X8
ASSETS LIABILITIES
Cash $ 4,000 Accounts Payable $ 8,000
Accounts Receivable 23,000 Note Payable 36,000
Office Supplies 1,000 Total Liabilities 44,000
Office Furniture 16,000
Land 50,000 OWNERS EQUITY
Capital 50,000*
Total Assets $94,000 Total Liabilities & Owners Equity $94,000

*Owners equity (Capital) = Total Assets Total Liabilities


= $94,000 - $44,000
= $50,000
The accounts that are not represented on the balance sheet are:

Salary Expense
Rent Expense
Property Tax Expense
Service Revenue

These are all revenues & expenses that should be reported on the Income Statement.

Mona School of Business & Management, University of the West Indies at Mona -2-