PROBLEM 1 ASSETS = LIABILITIES + EQUITY TOTAL POINTS

2X8 16
INCREASE IN ASSETS = INCREASE IN LIABILITIES AND EQUITY Summary:

3,560,000 = 1,080,000 + 2,400,000 + 240,000 PR. 1 360,000 - Net Income

3,560,000 = 3,720,000 PR. 2
3,560,000 = 3,720,000 - 160,000 The should be decrease in R/E during a) 3,400,000
the period to balance the equation. b) 200,000 - Net Loss
R/E, Beg 0 PR. 3
Net Income (squeeze) 360,000 ü 2 a) 700,000 - Net Income
Dividends -520,000 b) 2,255,000
R/E, End -160,000 c) 815,000
d) 1,555,000
PROBLEM 2 ASSETS = LIABILITIES + EQUITY e) 285,000

Beginning ###3,400,000ü = 840,000 + 2,560,000

(a)
Ending 3,600,000 = 1,000,000 + 2,600,000

Increase/ Decrease in Equity

Ending 2,600,000
Beginning 2,560,000
Increase 40,000 Computation of Net Income
Additional Issuance 240,000
Dividends 0
Net Loss (squeeze) ü
-200,000 2
Increase during the year 40,000 (b)
PROBLEM 3

INCOME STATEMENT BALANCE SHEET

Sales* 3,040,000 Cash (400 + 3075 - 2570) 905,000

COS: Accounts Receivable (200 * 95%) 190,000
Beg. Invty. 230,000 Inventory 245,000 ü
Purch.** 1,570,000 Prepaid Insurance 25,000 2,255,000 Non-Current Assets
End. Invty. -245,000 ü
(d)1,555,000 2 Land, at cost 500,000 (b)
Gross Profit 1,485,000 Building (2M - 900T) 1,100,000
Doubtful Accounts Expense -10,000 Equipment 655,000 Costs (800T + 200T - 50T) 950,000
Insurance Expense*** -90,000 Total Assets 3,620,000 Accumulated Dep'n.:
Depreciation expense - building (10%) -200,000 € 1-Jan 240,000
Depreciation expense - equipment**** -85,000 ü 285,000 Accounts Payable 100,000 Exp. For equipments
Salaries Expense***** -400,000 2 Accrued Salaries 30,000 existing on Jan. 1 80,000 800T * 10%
Other expense - cash -135,000 Advances from customers 50,000 Exp. For equipment
Gain from sale (45T - 20T) 25,000 Dividends Payable (2.5M * 5% * 1) 125,000 purchased on Oct. 1 5,000 200* 10% * 3/12
Earned Income - from advances****** 110,000 Share Capital 2,500,000 Accum. Dep'n. of
Net Income ü
700,000 2 R/E (365T + 700 - 250T) © ü
815,000 2 Equipment sold -30,000 295,000
(a) Total Liab. And Equity 3,620,000 655,000
*Sales **Purchases
A/R, end 200,000 A/P, end 100,000 Dividends Declared (5% each declaration) 250,000 2.5M * 5% * 2
Tot. Collections 2,960,000 Tot. Pay. 1,640,000 Dividends Paid 125,000 Share Cap.
A/R, beg. -120,000 A/P, beg. -170,000 Dividends Payable 125,000
3,040,000 1,570,000

***Insurance Expense ****Depreciation Expense - equipment

Insurance premium paid 80,000 Existing equipment - Jan. 1 (10%) 80,000
Prepaid Ins., beg. 35,000 Equip. purch. - Oct 1 (10% * 3/12) 5,000
Prepaid Ins., end. -25,000 85,000
90,000

*****Salaries Expense ******Earned Income - from advances

Salaries paid 390,000 Advances received - current period 70,000
Accrued Ending 30,000 Unearned, beginning 90,000
Accrued Beginning -20,000 Unearned, ending -50,000
400,000 110,000