Chapter 1 - Text Exercises

BE1-3 Ethics
BE1-6 GAAP
BE1-8 Acctg Eqn
BE1-9 Acctg Eqn
BE1-12 Transaction analysis - using table
BE1-16, 17, 18 Financial Statements - IS, SOE, BS
E1-2 Users - internal / external
E1-12 Transaction analysis - using table
E1-13 Transaction analysis - using table
E1-15 IS / SOE
E1-16 (uses 15) BS
E1-14 (uses 13) IS / SOE - from table
P1-8A Transaction analysis - using table, and FS (all 3)
P1-9A IS, SOE, BS

*practice these as often as you need to -- doing them more than once is a GOOD idea!!
*make sure to practice building the financial statements from SCRATCH (don't just copy over a template)!!
*Excel formatting is KEY - cell-referencing, proper number/accounting formatting, proper financial stateme
 t just copy over a template)!!
tting, proper financial statement formatting (underlining, etc.) is VERY IMPORTANT
BE1-3
Describe an ethical dilemma that each of the following individuals might encounter:

1) A student in an introductory accounting course

2) A production supervisor

3) A banker
BE1-6
Match each of the following scenarios to the best GAAP principle:

1) Transactions are recorded in terms of units of money.

2) Transactions are recorded based on the actual amount received or paid.
3) Indicates that personal and business record keeping should be kept separate.
4) Performance obligation has been satisfied.
5) Businesses are expected to continue operating indefinitely.

Generally Accepted Accounting Principles:

Historical cost
Revenue recognition
Going concern assumption
Reporting entity concept
Monetary unit concept
BE1-8
Solve each accounting equation by determining the missing amounts.

ASSETS = LIABILITIES + OWNERS' EQUITY

$75,000 = $24,000 + ?

? = $150,000 + $91,000

$89,000 = ? + $52,000
BE1-9
Use the accounting equation to answer each of the following questions:

1) The liabilities of Weber Company are $120,000 and the owner's equity is $232,000. What is the amount of Weber Com

2) The total assets of King Company are $190,000 and its owner's equity is $91,000. What is the amount of its total liabil

3) The total assets of Smith Company are $800,000 and its liabilities are equal to one half of its total assets. What is the a
is the amount of Weber Company's total assets?

the amount of its total liabilities?

its total assets. What is the amount of Smith Company's owner's equity?
BE1-12
Determine effects of the transactions on the accounting equation, using the table format below. The first one has
Indicate whether the transactions increased (+), decreased (−), or had no effect (NE) on each element of the accou

Transaction
a) Purchased $250 of supplies on account. a
b) Performed $500 of services on account. b
c) Paid $300 of operating expenses. c
d) Paid $250 cash on account for the supplies purchased in item (a) above. d
e) Invested $1,000 cash in the business. e
f) Owner withdrew $400 cash. f
g) Hired an employee to start working the following month. g
h) Received $500 from a customer who had been billed prev. in item (b) above. h
i) Purchased $450 of equipment in exchange for a note payable. i
at below. The first one has been done for you as an example.
each element of the accounting equation.

Owner's Equity
Assets Liabilities Capital Drawings Revenues Expenses
$250 $250 NE NE NE NE
BE1-16,17,18
Prairie Company is owned and operated by Natasha Woods. The accounts used by Prairie Co. are listed in alphab

Accounts payable $ 90,000

Accounts receivable $ 77,500
Advertising expense $ 3,600
Cash $ 59,300

Prepare an income statement for the month ended October 31, 2017.

Using the data and information from Prairie's income statement, prepare a statement of owner's equity.

Using the data and information from Prairie's income statement and statement of owners' equity, prepare a bala
The accounts used by Prairie Co. are listed in alphabetical order.

N. Woods, capital, October 1, 2017 $ 36,000

N. Woods, drawings $ 6,000
Rent expense $ 2,600
Service revenue $ 23,000

ent, prepare a statement of owner's equity.

ent and statement of owners' equity, prepare a balance sheet.

E1-2
lululemon Athletica Inc., a public company, is known around the world for its clothing and accessories. It has mor
Identify users and uses of its accounting information.

a) Identify two internal users of lululemon's accounting information. Write a question that each user might try to answe

b) Identify two external users of lululemon's accounting information. Write a question that each user might try to answe
the world for its clothing and accessories. It has more than 250 stores in Canada, the USA, Australia, and New Zealand.

ation. Write a question that each user might try to answer by using accounting information.

ation. Write a question that each user might try to answer by using accounting information.
lia, and New Zealand.
E1-12
At the beginning of March, Brister Software Company had Cash of $12,000, Accounts Receivable of $18,000, Acco
During the month of March, the below transactions occurred. Prepare a tabular analysis to analyze the effects of
Make sure the first row contains the amounts the company had at the beginning of March.

a) Purchased equipment for $23,000 from Digital Equipment. Paid $3,000 cash and signed a note payable for the bala
b) Received $12,000 from customers for contracts billed in February.
c) Paid $3,000 for March rent of office space.
d) Paid $2,500 of the amounts owing to suppliers at the beginning of March.
e) Provided software services to Kwon Construction Company for $7,000 cash.
f) Paid BC Hydro $1,000 for energy used in March.
g) G. Brister withdrew $5,000 cash from the business.
h) Paid Digital Equipment $2,100 on account of the note payable issued for the equipment purchased in transaction 1
i) Hired an employee to start working in April.
j) Incurred advertising expense on account for March, $1,500.

ASSETS = LIABILITIES

Cash + Accounts + Equipment = Accounts + Notes

Receivable Payable Payable
Open Bal
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
ivable of $18,000, Accounts Payable of $4,000, and G. Brister, Capital of $26,000.
o analyze the effects of each of these transactions on this company (like Ill. 1-13 in your text).

a note payable for the balance.

purchased in transaction 1. Of this, $100 was for interest expense.

+ OWNERS' EQUITY

+ G. Brister, - G. Brister, + Revenues - Expenses

Capital Drawings
E1-13
A tabular summary of the transactions for Star & Co., an accounting firm, for its first month of operations, July 20
Use these transactions to calculate the profit and increase in owner's equity.

Accounts Prepaid Accounts

Cash + + + Equipment =
Receivable Insurance Payable
a) $18,000 $6,000
b) -4,000 8,000 4,000
c) -750 750
d) 3,500 4,800
e) -2,000 -2,000
f) -3,300
g) -800
h) 1,350 -1,350
i) -2,700
j) 420

1) Describe each transaction that occurred in the month.

2) Calculate the amount of profit for the month.

3) Calculate the increase in owner's equity for the month.

h of operations, July 2017, follows.

B. Star, B. Star,
+ - + Revenues - Expenses
Capital Drawings
$24,000

8,300

-3,300
-800 Rent expense

-2,700 Salaries expense

-420 Utilities expense
Description of Transaction
E1-15,16

Prepare income statement and statement of owner's equity.

Prepare balance sheet.

Atlantic Cruise Co. is owned by Irina Temelkova. The following information is an alphabetical listing of financial statemen

Accounts payable $ 47,750

Accounts receivable $ 42,950
Advertising expense $ 3,640
Building $ 122,570
Cash $ 20,080
Equipment $ 553,300
I. Temelkova, capital, June 1, 2016 $ 311,182
I. Temelkova, drawings $ 33,950
Insurance expense $ 2,566
n is an alphabetical listing of financial statement items for the company for the year ended May 31, 2017:

Interest expense $ 20,960

Investments by owner $ 5,847
Maintenance expense $ 82,870
Notes payable $ 379,000
Other expenses $ 66,500
Prepaid insurance $ 1,283
Salaries expense $ 126,950
Supplies $ 16,800
Ticket revenue $ 350,640
nded May 31, 2017:
E1-14

Using the transactions and analysis for Star & Co. for July 2017 presented in E1-12, prepare the financial statemen
Prepare an income statement and statement of owner's equity for July and a balance sheet at July 31.
the financial statements.
Problem 1-8A

Izabela Jach opened a medical office under the name Izabela Jach, MD, on August 1, 2017.
On August 31, the balance sheet showed Cash $3,000; Accounts Receivable $1,500; Supplies $600; Equipment $7,
During September, the following transactions occurred:

Sept. 4 Collected $800 of accounts receivable.

5 Provided services of $10,500, of which $7,700 was collected from patients and the remainder was on account.
7 Paid $2,900 on accounts payable.
12 Purchased additional equipment for $2,300, paying $800 cash and leaving the balance on account.
15 Paid salaries, $2,800; rent for August, $1,900; and advertising expenses, $275.
18 Collected the balance of the accounts receivable from August 31.
20 Withdrew $1,000 for personal use.
26 Borrowed $3,000 from the Bank of Montreal on a note payable.
28 Signed a contract to provide medical services, not covered under the government health plan, to employees of CRS
29 Received the telephone bill for September, $325.
30 Billed the government $10,000 for services provided to patients in September.

a) Beginning with the August 31 balances, prepare a tabular analysis of the effects of the September transactions on
b) Prepare an income statement and statement of owner's equity for September, and a balance sheet at September

TAKING IT FURTHER
What are the differences between purchasing an item on account and signing a note payable for the amount owin
ust 1, 2017.
500; Supplies $600; Equipment $7,500; Accounts Payable $5,500; Note Payable $3,000; and I. Jach, Capital, $4,100.

d the remainder was on account.

e balance on account.

ment health plan, to employees of CRS Corp. in October for $5,700. CRS Corp. will pay the amount owing after the medical services have b

ects of the September transactions on the accounting equation.

ber, and a balance sheet at September 30.

a note payable for the amount owing?

Capital, $4,100.

he medical services have been provided.

Problem 1-9A

Pavlov's Home Renovations was started in 2008 by Jim Pavlov. Jim operates the business from an office in his hom
Listed below, in alphabetical order, are the company's assets and liabilities as at December 31, 2017, and the reve

Accounts payable $ 7,850 Operating expenses $ 3,545

Accounts receivable 10,080 Prepaid insurance 1,685
Cash 8,250 Salaries expense 88,230
Equipment 29,400 Service revenue 153,750
Insurance expense 3,375 Supplies 595
Interest expense 1,195 Supplies expense 20,095
J. Pavlov, drawings 44,800 Unearned revenue 15,000
Notes payable 30,800 Vehicles 42,000

Jim's capital at the beginning of 2017 was $45,850. He made no investments during the year.

Prepare an income statement, statement of owner's equity, and balance sheet.

TAKING IT FURTHER
Why is it necessary to prepare the income statement first, then the statement of owner's equity, and the balance
rom an office in his home.
31, 2017, and the revenues, expenses, and drawings for the year ended December 31, 2017:

equity, and the balance sheet last?