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Accounting Assignment 1

The document provides information about the balance sheets of two businesses - a traveling circus called "Here Come the Clowns" and a farm called "Wilson Farms, Inc.". It lists the ledger accounts of the circus and farm and asks the student to prepare balance sheets for each, computing any missing values. It also asks them to explain what changes would be needed if certain assets were destroyed after the balance sheets were prepared. The second part of the document provides information about the balance sheet of a business called "Hit Scripts" prepared by its manager, Joe, and asks the student to correct errors and explain Joe's treatments based on additional facts provided.

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Hamna Farooq
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361 views2 pages

Accounting Assignment 1

The document provides information about the balance sheets of two businesses - a traveling circus called "Here Come the Clowns" and a farm called "Wilson Farms, Inc.". It lists the ledger accounts of the circus and farm and asks the student to prepare balance sheets for each, computing any missing values. It also asks them to explain what changes would be needed if certain assets were destroyed after the balance sheets were prepared. The second part of the document provides information about the balance sheet of a business called "Hit Scripts" prepared by its manager, Joe, and asks the student to correct errors and explain Joe's treatments based on additional facts provided.

Uploaded by

Hamna Farooq
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Assignment 1:

PROBLEM 2.5A
HERE COME THE CLOWNS! Is the name of a traveling curcus. The ledger accounts of the business at June
30, 2007, are listed here in alphabetical order:

Account Payable $26,100 Notes Payable $180,000


Accounts Receivable 7,450 Notes Receivable 9,500
Animals 189,060 Props & Equipments 89,580
Cages 24,630 Retained Earnings 27,230
Capital Stock 310,000 Salaries Payable 9,750
Cash. ? Tents 63,000
Costumes 31,500 Trucks & Wagons 105,841

Instructions:
a. Prepare a balance sheet by using these items and computing the amount of Cash at June 30, 2007.Organize
your balance sheet similar to the one illustrated in Exhibit 2-10 (After “Accounts Receivable.” You may list
the remaining assets in any order.) Include a proper balance sheet heading.

b. Assume that late in the evening of June 30, after your balance sheet had been prepared, a fire destroyed one
of the tents, which had cost $14,300, the tent was not insured. Explain what changes would be required in
your June 30 balance sheet to reflect the loss of this asset.

PROBLEM 2.6A
The following list of balance sheet items are in random order of Wilson Farms, Inc., at September 30, 2007

Land $ 490,000 Fences and Gates $ 33,570


Barns and Sheds 78,300 Irrigation System 20,125
Notes Payable 330,000 Cash 16,710
Accounts Receivable 22,365 Live Stock 120,780
Citrus Trees 76,650 Farm Machinery 42,970
Accounts Payable 77,095 Retained Earning ?
Property Taxes Payable 9,135 Wages Payable 5820
Capital Stock 290,000

Instructions:
a. Prepare a balance sheet by using these items and computing the amount for Retained Earnings. Use a
sequence of assets similar to that illustrated in Exhibit 2-10 (After “Barns and Sheds,” you may list the
remaining assets in any order.) Include a proper heading for your balance sheet.

b. Assume that on September 30, immediately after this balance sheet was prepared, a tornado completely
destroyed one of the barns. This barn had a cost of $13,700 and was not insured against this type of
disaster. Explain what changes would be required in your September 30 balance sheet to reflect the loss of
this barn.
PROBLEM 2.10A
Hit Scripts is a service-type enterprise in the entertainment field, and its manager. Joe’s Debit has only a
limited knowledge of accounting. Joe’s Prepared the following balance sheet, which, although arranged
satisfactorily, contains certain errors with respect to such concepts as the business entity and asset valuation.
Joe owns all of the corporation’s outstanding stock.

HIT SCRIPTS
BALANCE SHEET
NOVEMBER 30,2007
Assets Liabilities & Owner’s Equity .
Cash $ 5,000 Liabilities:
Notes Receivable 4,000 Notes Payable $ 65,000
Accounts Receivable 3,000 Accounts Payable 32,000
Land 60,000 Total Liabilities $ 97,000
Building 75,000 Owner’s Equity:
Office Furniture 9,600 Capital Stock 10,000
Others Assets 25,000 Retained Earnings 74,600
Total 181,600 Total 181,600

In discussion with Joe and by inspection of the accounting records, you discover the following facts:
1. The amount of cash, $5000, Includes $2000 in the company’s bank account, $1,200 on hand in the
company’s safe, and $ 1,800 in Joe’s Personal savings accounts.
2. One of the notes receivable in the amount of $600 in an IOU that Joe received in a poker game five years
ago, The IOU is signed by “G.W..” whom Joe met at the game but has not heard from since.
3. Office furniture includes $2,500 for an Indian rug for the office purchased on November 15. The total cost
of the rug was $10,000. The business paid $2,500 in cash and issued a note payable to Jana Carpet for the
balance due ($7,500). As no payment on the note is due until January, this debt is not included in the
liabilities above.
4. Also included in the amount for office furniture is a computer that cost $800 but in not on hand because Joe
donated it to a local charity.
5. The “Other Assets” of $25,000 represent the total amount of income taxes Joe has paid the federal
government over a period. Joe believes the income tax law to be unconstitutional. And a friend who attends
law school has promised to help Joe recover the taxes paid as soon as he passes the bar exam.
6. The asset “Land” was acquired at a cost of $15,000 but was increased to a valuation of $60,000 when one
of Joe’s friends offered to pay that much for it if Joe’s would move the building off the lot.
7. The accounts payable include business debts of $30,000 and the $2,000 balance owed on Joe’s personal
MasterCard.

Instructions:
a. Prepare a corrected balance sheet at November 30, 2007.
b. For each of the seven numbered items above, use a separate numbered paragraph to explain
whether the treatment followed by Joe is in accordance with generally accepted accounting
principles.

And the same Questions from the B Part.

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