Question 1

A service proprietorship shows five transactions summarized below. The effect of each transaction on the accounting equation is shown.  Instructions
For each transaction, write an explanation of the nature of the transaction.

Accepted Answer

The answer of A service proprietorship shows five transactions summarized...

Question 2

Each of the following independent situations represents a departure from generally accepted accounting principles:
1. Value Properties owns a number of apartment buildings. In April 2013 a new building was purchased for $1,000,000. Because of the rapid increase in real estate prices, by the time Value's accountant recorded the purchase in July 2013, the estimated value of the property had increased to $1,200,000. The accountant decided to record the new building at $1,200,000.
2. Expat Imports International purchases products in the United States for resale in Canada. The goods they buy in the US are paid for in US dollars. In Expat's financial statements, each amount is identified as being in either US or Canadian dollars, for example as follows:  Instructions
For each situation, (i) identify which principle has been violated, (ii) describe what the correct accounting treatment would be, and (iii) why the correct treatment provides better information.

Accepted Answer

The answer of Each of the following independent situations represents...

Question 3

Selected transactions for Givens Lawn Services are listed below:
1. Purchased a new lawn mower for $2,000, making a 10% down payment in cash, the remainder is on account.
2. Purchased $350 supplies for cash.
3. Billed customers $1,500 for lawn services completed.
4. Purchased used truck for $6,500, fully financed by a bank loan.
5. Collected $800 from customers for services previously billed.
6. Paid balance owing on lawn mower.
7. Incurred telephone expenses of $85 on account.
8. Completed services for customers who pay $440 cash.
9. William Givens, the owner, invests $7,000 of additional funds in the business.
10. Part of the funds invested is used to repay the full balance of the bank loan plus $65 in interest expense.
11. $1,250 in wages is paid to employees.
12. William withdrew $1,000 cash for personal use.
Instructions
For each transaction, state whether the transaction increases or decreases assets, liabilities and/or owner's equity, and by what amount(s).

Accepted Answer

The answer of Selected transactions for Givens Lawn Services are...

Question 4

Ken Serratore decides to open a cleaning and laundry service near the local college campus that will operate as a proprietorship. The transactions for the month of June are listed below:
1. Ken Serratore invests $20,000 in cash to start a cleaning and laundry business on June 1.
2. Purchased laundry equipment for $5,000 paying $3,000 in cash and the remainder due in 30 days.
3. Purchased laundry supplies for $1,200 cash.
4. Received a bill from Campus News for $300 for advertising in the campus newspaper.
5. Cash revenue from customers for cleaning and laundry amounted to $1,500.
6. Paid salaries of $200 to student workers.
7. Billed the Tiger Football Team $100 for cleaning and laundry services.
8. Paid $300 to Campus News for advertising that was previously billed in Transaction 4.
9. Ken Serratore withdrew $700 from the business for living expenses.
10. Incurred utility expenses for month on account, $400.
Instructions
Analyze the transactions above in terms of their effect on the basic accounting equation. Record each transaction by increasing (+) or decreasing (-) the dollar amount of each item affected. Total and balance the equation at the end of the month.

Accepted Answer

The answer of Ken Serratore decides to open a cleaning...

Question 5

Analyze the transactions described below and indicate their effect on the basic accounting equation. Use a plus sign (+) to indicate an increase and a minus sign (-) to indicate a decrease.

Accepted Answer

The answer of Analyze the transactions described below and indicate...

Question 6

What is meant by the cost principle? Explain why the principle is used primarily when accounting for assets used in a business.
2. Explain the monetary unit assumption of accounting. Explain how a business may have competitive advantage(s) that are not reported in the financial statements due to this principle, and provide an example

Accepted Answer

The answer of What is meant by the cost principle?...

Question 7

Greg Stewart was reviewing his business activities at the end of the year (February 28, 2013) and decided to prepare a Statement of Owner's Equity. At the beginning of the year, his assets were $500,000 and his liabilities were $150,000. At the end of the year the assets had grown to $950,000 but liabilities had also increased to $300,000. The profit for the year was $420,000. Greg had withdrawn $120,000 during the year for his personal use.
Instructions
Prepare a Statement of Owner's Equity in good form.

Accepted Answer

The answer of Greg Stewart was reviewing his business activities...

Question 8

The following are six questions that users of accounting information might ask about Redpath Auto Towing (Redpath).
Instructions
For each question determine which part of the financial statements (income statement, balance sheet, or cash flow statement) would provide the information required.

Accepted Answer

The answer of The following are six questions that users...

Question 9

For each of the following, describe a transaction that will have the stated effect on the elements of the accounting equation.
1. Increase one asset and decrease another asset.
2. Increase an asset and increase a liability.
3. Decrease an asset and decrease a liability.
4. Increase an asset and increase owner's equity.
5. Increase one asset, decrease another asset, and increase a liability.

Accepted Answer

The answer of For each of the following, describe a...

Question 10

Match between columns
                        Premises: Delivery Truck
Salaries payable
Telephone expense
Consulting fees earned
Accounts Receivable
Note payable
Sales
Bank loan payable
Interest Revenue
Supplies expense
Unearned Revenue
Rental Income
Cash
Commission revenue
Prepaid expenses
Building
Accounts Payable
Owners investment
Owners drawings
Insurance expense

Accepted Answer

The Answer of Statement of Owner's Equity and Income Statement is...

Question 11

In each of the following situations, the accountant for Sydney Design Services (Sydney) must decide how to record the information in the financial statements. Sydney is a proprietorship owned and operated by Gloria Steinwald.
1. In April, Sydney purchased some furniture that will be used in a client's newly designed office. Sydney paid $4,000 for the furniture, and the client will pay Sydney $5,600 when it is delivered and assembled in May. The accountant wants to know at which amount the furniture should be reported on the April 30 balance sheet.
2. In June, Sydney signed a long-term contract with a hotel chain to review all of their hotels' décor annually and recommend updates as fashions change. The fees will be based on the amount of time spent on the annual review. The first location will be evaluated starting in September. The accountant believes this contract is of great value to Sydney even though no money has changed hands yet, and wonders how it can be shown in the June 30 financial statements.
Instructions
For each of the situations, identify which generally accepted accounting principle would guide the accountant in deciding how to report the situation, and describe the correct treatment.

Accepted Answer

The answer of In each of the following situations, the...

Question 12

Below are three lists of accounting information with missing amounts. Each list is independent of the others.  Instructions
Use the accounting equation to determine the missing amounts.

Accepted Answer

The answer of Below are three lists of accounting information...

Question 13

Selected transactions for the Barkley Company are listed below:
1. Paid monthly utility bill.
2. Purchased new display case for cash.
3. Paid cash for repair work on security system.
4. Billed customers for services performed.
5. Received cash from customers billed in 4.
6. Withdrew cash for owner's personal use.
7. Incurred advertising expenses on account.
8. Paid monthly rent.
9. Received cash from customers when service was provided.
Instructions
List the number of the transaction and then describe the effect of each transaction on assets, liabilities, and owner's equity.
Sample: Made initial cash investment in the business. The answer would be: Increase in assets and increase in owner's equity.

Accepted Answer

The answer of Selected transactions for the Barkley Company are...

Question 14

Presented below is a balance sheet for the Marks Lawn Service at December 31, 2013.  The following additional data are available for the year which began on January 1, 2013: All expenses (excluding supplies expense) total $6,000. Supplies on January 1, were $11,000 and $3,000 of supplies were purchased during the year. Profit for the year was $8,000 and drawings were $5,000.
Instructions
Determine the following: (Show all calculations.) 
a. Supplies used during the year.
b. Total expenses for the year.
c. Service revenues for the year.
d. Bill Marks' capital balance on January 1.

Accepted Answer

The answer of Presented below is a balance sheet for...

Question 15

There are ten transactions listed below:
1. Receive cash from customers on account.
2. Initial cash contribution by an owner.
3. Pay cash to reduce an accounts payable.
4. Purchase supplies for cash.
5. Pay cash to reduce a notes payable.
6. Purchase supplies on account.
7. Customers pay cash for services rendered.
8. Purchase equipment with a note payable.
9. Pay utilities with cash.
10. Owner withdraws money from the business for personal use.
Instructions
Match the transactions that have the identical effect on the accounting equation. You should end up with 5 matches. The first one has been completed for you with an explanation.
Example: 1. and 4. are a match because both of them include one increase in assets and one decrease in assets, so there is no effect on the accounting equation.

Accepted Answer

The answer of There are ten transactions listed below:
1. Receive...

Question 16

Summaries of information from the balance sheets and income statements for four different proprietorships are provided below, with several amounts missing.  Instructions
Determine the missing amounts.

Accepted Answer

The answer of Summaries of information from the balance sheets...

Question 17

For each of the assumptions listed below, fill in the appropriate letter to indicate which of the following accounting assumptions have been violated.
a) Monetary Unit Assumption
b) Cost Principle
1. Harvester International revalues its financial statements each year to take into consideration the effects of inflation. The company justifies its decision by stating the "inflation adjusted statements more fully reflect the purchasing power of the company's earnings."
2. Ernie began operations 11 years ago and purchased land for $200,000. Ernie has since built a manufacturing plant on this land to use in daily operations. Today Ernie has appraised the value of his land to be $1.5 million. He would like the increase in the value of his land to be reported on the financial statements at $1.5 million.

Accepted Answer

The answer of For each of the assumptions listed below,...

Question 18

At September 1, 2013, the balance sheet accounts for Roxanne's Restaurant were as follows:  The following transactions occurred during the next two days:
Roxanne invested an additional $22,000 cash in the business. The accounts payable were paid in full. (No payment was made on the notes payable.)
Instructions
Prepare a Balance Sheet at September 3, 2013.

Accepted Answer

The answer of At September 1, 2013, the balance sheet...

Question 19

One item is omitted in each of the following summaries of balance sheet and income statement data for three different sole proprietorships, A, B, and C.  Instructions
Determine the amounts of the missing items, identifying each proprietorship by letter.

Accepted Answer

The answer of One item is omitted in each of...

Question 20

Listed below, in alphabetical order, are the balance sheet items of Sing Company at December 31, 2013.  Instructions
Prepare a balance sheet and include a complete heading.

Accepted Answer

The answer of Listed below, in alphabetical order, are the...

Quiz 1: Accounting in Action

A service proprietorship shows five transactions summarized below. The effect of each transaction on the accounting equation is shown. Instructions For each transaction, write an explanation of the nature of the transaction.

Analyze the transactions described below and indicate their effect on the basic accounting equation. Use a plus sign (+) to indicate an increase and a minus sign (-) to indicate a decrease.

The following are six questions that users of accounting information might ask about Redpath Auto Towing (Redpath). Instructions For each question determine which part of the financial statements (income statement, balance sheet, or cash flow statement) would provide the information required.

Listed below are various accounts which can be found on the financial statements. For each account listed, identify the applicable financial statement on which the account will be presented (Balance Sheet, Income Statement or Statement of Owner's Equity).

Below are three lists of accounting information with missing amounts. Each list is independent of the others. Instructions Use the accounting equation to determine the missing amounts.

Summaries of information from the balance sheets and income statements for four different proprietorships are provided below, with several amounts missing. Instructions Determine the missing amounts.

One item is omitted in each of the following summaries of balance sheet and income statement data for three different sole proprietorships, A, B, and C. Instructions Determine the amounts of the missing items, identifying each proprietorship by letter.

Listed below, in alphabetical order, are the balance sheet items of Sing Company at December 31, 2013. Instructions Prepare a balance sheet and include a complete heading.