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Problems: Set C: Instructions

American Travel Agency had $10,000 in initial owner's capital. During April it earned $9,500 in revenue and incurred $4,000 in expenses, resulting in net income of $6,600. Nancy Grimwood, Attorney at Law had transactions in August including $9,000 in revenue and $4,350 in expenses. This resulted in net income of $4,200 and total assets of $16,900 at the end of August. Fancy Cosmetics Co. started with $26,200 in owner's capital. In June it had $6,000 in revenue and $3,400 in expenses, resulting in net income of $2,800 and total

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368 views2 pages

Problems: Set C: Instructions

American Travel Agency had $10,000 in initial owner's capital. During April it earned $9,500 in revenue and incurred $4,000 in expenses, resulting in net income of $6,600. Nancy Grimwood, Attorney at Law had transactions in August including $9,000 in revenue and $4,350 in expenses. This resulted in net income of $4,200 and total assets of $16,900 at the end of August. Fancy Cosmetics Co. started with $26,200 in owner's capital. In June it had $6,000 in revenue and $3,400 in expenses, resulting in net income of $2,800 and total

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Rabie Haroun
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CHAPTER 1

PROBLEMS: SET C
P1-1C On April 1, Barb Massoth established American Travel Agency. The following Analyze transactions and
transactions were completed during the month. compute net income.

1. Invested $10,000 cash to start the agency. (LO 3, 4)


2. Paid $400 cash for April office rent.
3. Purchased equipment for $2,500 cash.
4. Incurred $300 of advertising costs in the Chicago Tribune, on account.
5. Paid $600 cash for office supplies.
6. Recognized $9,500 for services rendered: $3,000 cash is received from customers, and
the balance of $6,500 is billed to customers on account.
7. Withdrew $200 cash for personal use.
8. Paid Chicago Tribune amount due in transaction (4).
9. Paid employees’ salaries $2,200.
10. Received $4,000 in cash from customers who have previously been billed in
transaction (6).
Instructions
(a) Prepare a tabular analysis of the transactions using the following column headings: Cash, (a) Total assets $16,400
Accounts Receivable, Supplies, Office Equipment, Accounts Payable, Owner’s Capital,
Owner’s Drawings, Revenues, and Expenses.
(b) From an analysis of the owner’s equity column, compute the net income or net loss (b) Net income $6,600
for April.
Analyze transactions and
P1-2C Nancy Grimwood opened a law office, Nancy Grimwood, Attorney at Law, on
prepare income statement,
July  1, 2017. On July 31, the balance sheet showed Cash $4,000, Accounts Receivable owner’s equity statement, and
$1,500, Supplies $500, Office Equipment $5,000, Accounts Payable $4,200, and Owner’s balance sheet.
Capital $6,800. During August the following transactions occurred.
(LO 3, 4, 5)
1. Collected $1,400 of accounts receivable.
2. Paid $2,700 cash on accounts payable.
3. Recognized revenue of $9,000 of which $3,000 is collected in cash and the balance is
due in September.
4. Purchased additional equipment for $1,000, paying $400 in cash and the balance on
account.
5. Paid salaries $3,000, rent for August $900, and advertising expenses $350.
6. Withdrew $750 in cash for personal use.
7. Received $4,000 from Standard Federal Bank—money borrowed on a note payable.
8. Incurred utility expenses for month on account $550.
Instructions
(a) Prepare a tabular analysis of the August transactions beginning with July 31 (a) Total assets $16,900
balances. The column headings should be as follows: Cash 1 Accounts Receivable 1
Supplies 1 Equipment 5 Notes Payable 1 Accounts Payable 1 Owner’s Capital 2 Owner’s
Drawings 1 Revenues 2 Expenses.
(b) Prepare an income statement for August, an owner’s equity statement for August, and (b) Net income $4,200
a balance sheet at August 31. Total assets $16,900
P1-3C On June 1, Laurie Shaw started Fancy Cosmetics Co., a company that provides Prepare income statement,
individual skin care treatment, by investing $26,200 cash in the business. Following are owner’s equity statement, and
the assets and liabilities of the company at June 30 and the revenues and expenses for the balance sheet.
month of June. (LO 5)
Cash $11,000 Notes Payable $13,000
Accounts Receivable 4,000 Accounts Payable 1,200
Service Revenue 6,000 Supplies Expense 1,600
Supplies 2,000 Gasoline Expense 800
Advertising Expense 500 Utilities Expense 300
Equipment 25,000
Laurie Shaw made no additional investment in June, but withdrew $1,200 in cash for
personal use during the month.
(a) Net income $2,800
Instructions
(a) Prepare an income statement and owner’s equity statement for the month of June and Owner’s capital $27,800
a balance sheet at June 30, 2017. Total assets $42,000
2 1 Accounting in Action

(b) Net income $3,500 (b) Prepare an income statement and owner’s equity statement for June assuming the fol-
Owner’s capital $28,500 lowing data are not included above: (1) $800 of revenue was earned and billed but not
collected at June 30, and (2) $100 of gasoline expense was incurred but not paid.
Analyze transactions and P1-4C Bruce Jenner started his own consulting firm, Jenner Consulting, on May 1, 2017.
prepare financial statements. The following transactions occurred during the month of May.
(LO 3, 4, 5) May 1 Jenner invested $8,000 cash in the business.
2 Paid $800 for office rent for the month.
3 Purchased $500 of supplies on account.
5 Paid $50 to advertise in the County News.
9 Received $3,000 cash for services provided.
12 Withdrew $700 cash for personal use.
15 Performed $4,300 of services on account.
17 Paid $3,000 for employee salaries.
20 Paid for the supplies purchased on account on May 3.
23 Received a cash payment of $3,000 for services provided on account on May 15.
26 Borrowed $5,000 from the bank on a note payable.
29 Purchased office equipment for $2,800 on account.
30 Paid $150 for utilities.

Instructions
(a) Ending cash $13,800 (a) Show the effects of the previous transactions on the accounting equation using the
following format.

Assets Liabilities Owner’s Equity


Accounts Notes Accounts Owner’s Owner’s
Date Cash 1 Receivable 1 Supplies 1 Equipment 5 Payable 1 Payable 1 Capital 2 Drawings 1 Revenues 2 Expenses

(b) Net income $3,300 (b) Prepare an income statement for the month of May.
(c) Total assets $18,400 (c) Prepare a balance sheet at May 31, 2017.
Determine financial statement P1-5C Financial statement information about four different companies is as follows.
amounts and prepare owner’s
equity statement. Harpo Curly Groucho Moe
Company Company Company Company
(LO 4, 5)
January 1, 2017
Assets $ 80,000 $90,000 (g) $150,000
Liabilities 50,000 (d) 75,000 (j)
Owner’s equity (a) 50,000 49,000 100,000
December 31, 2017
Assets (b) 117,000 180,000 (k)
Liabilities 55,000 72,000 (h) 80,000
Owner’s equity 40,000 (e) 100,000 145,000
Owner’s equity changes in year
Additional investment (c) 8,000 10,000 15,000
Drawings 10,000 (f) 12,000 10,000
Total revenues 350,000 400,000 (i) 500,000
Total expenses 335,000 385,000 360,000 (l)

Instructions
(a) Determine the missing amounts. (Hint: For example, to solve for (a), Assets 2 Liabilities
5 Owner’s equity 5 $30,000.)
(b) Prepare the owner’s equity statement for Harpo Company.
(c) Write a memorandum explaining the sequence for preparing financial state-
ments and the interrelationship of the owner’s equity statement to the income state-
ment and balance sheet.

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