Accounting 101- CH 2

At the end of the first month of operations for Jackson's Catering Service, the business had the following accounts: Cash, $21,000; Prepaid Rent, $500; Equipment, $7,500 and Accounts Payable $4,000. By the end of the month, Jackson's had earned $32,000 of Revenues, and used $1,800 of Utilities Expenses, $4,000 of Rent Expense and $3,600 of Salaries Expenses. Calculate the net income to be reported by the company for this first month.

$22,600 Explanation: Revenues $32,000 − Utilities Expense $1,800 − Rent Expense $4,000 − Salaries Expense $3,600 = Net Income $22,600.

At the end of its first year of operations, Shapiro's Consulting Services reported net income of $27,000. They also had account balances of: Cash, $16,000; Office Supplies, $3,200, Equipment, $24,000 and Accounts Receivable, $8,000. The owner's total investment for this first year was $15,000 and the owner withdrew $2,000 for personal use. Calculate the ending balance to be reported on the Statement of Owner's Equity in the Owner's Capital account.

$40,000 Explanation: Investments $15,000 + Net Income $27,000 − Withdrawals $2,000 = $40,000. Note that the beginning capital balance would typically be added within the formula as well, but as this is the company's first year of operations, the beginning capital balance is zero.

If the following are the only accounts of Jones Supply Company, what is the missing Supplies balance? Cash: $8,000 Supplies: ????? Accounts Payable: $4,000 John Smith, Capital: $9,000

$5,000 Explanation: The fundamental accounting equation dictates that assets (cash & supplies) equal liabilities (accounts payable) plus owner's equity (John Smith, capital). Therefore $8,000 + $5,000 = $4,000 + $9,000

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $11,350; Prepaid Insurance, $400; Equipment, $26,200 and Cash, $21,650. On the same date, SloMo owed the following creditors: Simpson Supply Company, $17,000; Allen Office Equipment, $14,500. The total assets for the SloMo Delivery Service are:

$59,600 Explanation: Assets = Accounts Receivable, $11,350 + Prepaid Insurance, $400 + Equipment $26,200 + Cash, $21,650 = $59,600.

The Sidewalk Company has the following balances at year-end: Cash: $12,000, Equipment: $27,000, Supplies: $2,000, Accounts Payable: $20,000. Complete the accounting equation for the company.

Assets: $41,000 Liabilities: $ 20,000 Owner's Equity $21,000 Explanation: Assets = Cash $12,000 + Equipment $27,000 + Supplies $2,000 = $41,000. Liabilities = Accounts Payable $20,000. Equity = $41,000 (Assets) − $20,000 (Liabilities) = $21,000

What is the correct order in which to prepare the three financial statements?

Income Statement; Statement of Owner's Equity; Balance Sheet

Revenue by definition is:

amounts earned from the sale of goods or services.

When equipment is purchased on credit,

assets and liabilities increase.

Ginger Yale Ice Company receives money from a customer on account. Recording this transaction will:

increase Cash.

Which of these accounts would appear on a firm's income statement?

revenues and expenses