ACC 101 Chapter 1 Homework - Lecture - Exercises

During its first year of operations, Mario Lupo formed Lupo Company and personally invested $15,000 in the business. The owner of Lupo Company withdrew $2,000 cash for personal use. The company earned $35,000 of revenues and incurred $23,000 of expenses. At the end of the year, the company's equity totaled:

$25,000

If equity is $30,000 and liabilities are $19,000, then assets must equal:

$49,000

Answer the following questions. Hint: Use the accounting equation. 1.January 1, Lumia Company's liabilities are $75,000 and its equity is $55,000. On January 3, Lumia purchases and installs solar panel assets costing $25,000. For the panels, Lumia pays $11,500 cash and promises to pay the remaining $13,500 in six months. What is the total of Lumia's assets after the solar panel purchase? 2.March 1, ABX Company's assets are $115,000 and its liabilities are $45,000. On March 5, ABX is fined $22,500 for failing emission standards. ABX immediately pays the fine in cash. After the fine is paid, what is the amount of equity for ABX? 3.August 1, Lola Company's assets are $45,000, liabilities are $25,000. August 5, a new investor contributes $10,500 cash and $14,500 in equipment in exchange for ownership in Lola. After the investment, what is the amount of equity for Lola?

1. Assets=Liabilities+Equity January1: $130,000=$75,000+$55,000 Change: 13,500=13,500+0 January 3: $143,500=$88,500+$55,000 2. Assets=Liabilities+Equity March1: $115,000=$45,000+$70,000 Change: 22,500=0+22,500 March 5: $92,500=$45,000+$47,500 3. Assets=Liabilities+Equity August1: $45,000=$25,000+$20,000 Change: 25,000=0+25,000 August 5: $70,000=$25,000+$45,000

Identify the correct principle for each of the following activities using the drop-down list.

A company records the expenses incurred to generate the revenue reported=Expense recognition principle Revenue is recognized when goods are provided to the customer at the amount expected to be received=Revenue recognition principle A company reports the details behind financial statements that would impact user's decisions=Full-disclosure principle Accounting information is based on actual cost=Measurement principle

Why is accounting important?

Accounting information impacts all of us.

Determine the missing amount from each of the separate situations given below.

Assets=Liabilities+Equity 1.$164,000=$129,000+$35,000 2.$100,000=$33,000+$67,000 3.$185,000=$123,000+$62,000

Identify which items belong on the statement of cash flows.

Cash flows from investing, operating and financing activities

Identify which items belong on the balance sheet.

Cash, accounts receivable, and owner, capital

On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $83,660 in assets to launch the business. On December 31, the company's records show the following items and amounts. Cash $ 12,040 Cash withdrawals by owner $ 1,760 Accounts receivable 13,720 Consulting revenue 13,720 Office supplies 2,990 Rent expense 3,210 Land 45,940 Salaries expense 6,690 Office equipment 17,710 Telephone expense 870 Accounts payable 8,230 Miscellaneous expenses 680 Owner investments 83,660 Use the above information to prepare a December 31 balance sheet for Ernst Consulting.

ERNST CONSULTING Balance Sheet December 31 Assets Cash$12,040 Accounts receivable 13,720 Office supplies 2,990 Liabilities Accounts payable$8,230 Total liabilities$8,230Land45,940EquityOffice equipment17,710Jasmin Ernst, Capital84,170Total assets$92,400Total liabilities and equity$92,400

On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $83,660 in assets to launch the business. On December 31, the company's records show the following items and amounts. Cash $ 12,040 Cash withdrawals by owner $ 1,760 Accounts receivable 13,720 Consulting revenue 13,720 Office supplies 2,990 Rent expense 3,210 Land 45,940 Salaries expense 6,690 Office equipment 17,710 Telephone expense 870 Accounts payable 8,230 Miscellaneous expenses 680 Owner investments 83,660 Using the above information prepare a December income statement for the business.

ERNST CONSULTING Income Statement For Month Ended December 31 Revenues Consulting revenue $13,720 Total revenues $13,720 Expenses Rent expense 3,210 Salaries expense 6,690 Telephone expense 870 Miscellaneous expenses 680 Total expenses 11,450 Net income $2,270

On December 1, Jasmin Ernst organized Ernst Consulting. On December 3, the owner contributed $83,660 in assets to launch the business. On December 31, the company's records show the following items and amounts. Cash $ 12,040 Cash withdrawals by owner $ 1,760 Accounts receivable 13,720 Consulting revenue 13,720 Office supplies 2,990 Rent expense 3,210 Land 45,940 Salaries expense 6,690 Office equipment 17,710 Telephone expense 870 Accounts payable 8,230 Miscellaneous expenses 680 Owner investments 83,660 Using the above information prepare a December statement of owner's equity for Ernst Consulting. Hint: Jasmin Ernst, Capital on December 1 was $0.

ERNST CONSULTING Statement of Owner's Equity For Month Ended December 31 Jasmin Ernst, Capital, December 1: $0 Add: Investments by owner 83,660 Add: Net income 2,270 85,930 Less: Withdrawals by owner 1,760 Jasmin Ernst, Capital, December 31 $84,170

The organization that is primarily responsible for developing GAAP for use by all U.S. companies is the:

FASB

Classify the following business activities using the drop-down list.

Happenings that affect the accounting equation=Events Exchanges of value between two entities=External transactions Exchanges within an entity=Internal transactions

The organization that is responsible for issuing International Financial Reporting Standards is the:

IASB

The four basic financial statements are:

Income Statement, Statement of owner's equity, Balance sheet, and Statement of cash flows.

Analyze the following transaction and select the best answer. Tyler invests $2,000 cash to form a consulting business set up as a proprietorship. This transaction will:

Increase equity by $2,000.

Identify which items belong on the statement of owner's equity.

Owner, withdrawals, beginning owner, capital, ending owner, capital

Identify the type of activity by choosing the best answer for each question. Select each item listed below as being an identifying, recording, or a communicating activity.

Preparing and entering a list of checks issued=Recording Using a cash register to enter sales =Recording Entering a list of the sales invoices, including the prices and quantities, for the company's recordkeeper=Identifying Interpreting information from financial reports=Communicating Preparing financial statements for creditors=Communicating

Identify the correct assumption for each of the following activities using the drop-down list

Presumes that the business will continue operating in the future=Going-concern assumption A business is accounted for separately from other business entities and its owner=Business entity assumption Transactions and events are expressed in units of money=Monetary unit assumption The life of the company can be divided into specific time periods=Time period assumption

Identify which items belong on the income statement.

Revenue, expenses and net income

On January 31, Jean Consulting Company receives a bill for that month's utilities in the amount of $500. Jean sets it aside because she does not plan to pay the bill until its due date of February 15. What effect, if any, does this event have on the company's accounting equation as of January 31?

The business must record this event, which would increase liabilities and decrease equity on January 31.

Match the term and the definition.

The recording of transactions and events only, either manually or electronically =Recordkeeping An information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activities=Accounting