Principles of Accounting Financial Statement

Chapter 1: Financial Statement

Exercises
I. Two items are omitted from each of the following summaries of balance sheet and income
statement data for two proprietorships for the year 2018, Neve Campbell and Maxim
Enterprises.
Neve Maxim
Campbell Enterprises
Beginning of year:
Total assets……………………………………………. $97,000 $129,000
Total liabilities………………………………………… 80,000 (c)
Total owner's equity………………………………….. (a) 95,000
End of year:
Total assets……………………………………………. 160,000 180,000
Total liabilities………………………………………… 120,000 50,000
Total owner's equity…………………………………... 40,000 130,000
Changes during year in owner's equity:
Additional investment………………………………… (b) 25,000
Drawings…………………………………………….... 24,000 (d)
Total revenues………………………………………… 215,000 100,000
Total expenses………………………………………… 175,000 85,000
Introduction: Determine the missing amounts.
II. The assets, liabilities, owner’s equity, revenues, and expenses of Ciliotta Design Studio at
December 31, 2018, the end of its first year of operation, have the following balances. During
the year, J. Ciliotta, the owner, invested $15,000 in the business.
Note payable $41,000 Office furniture $45,000
Rent expense 24,000 Utilities expense 6,800
Cash 3,600 Accounts payable 3,300
Office supplies 4,800 J. Ciliotta, capital 27,100
Salaries expense 60,000 Service revenue 158,100
Salaries payable 2,000 Accounts receivable 9,000
Property tax expense 1,200 Supplies expense 4,000
Requirements:
1. Prepare the income statement of Ciliotta Design Studio for the year ended December 31,
2018. What is the result of operations for 2018?
2. What was the amount of the proprietor’s withdrawals during the year?
III. Accent Photography works weddings and prom-type parties. The capital balance of M.A.
Thomas, the proprietor, was $56,000 at December 31, 2017. During 2018 he withdrew
$46,000 for personal use. At December 31, 2018, the business’s accounting records show
these balances:
Insurance expense $2,000 Accounts receivable $3,000
Cash 14,000 Note payable 35,000
Accounts payable 1,000 M.A. Thomas, Capital ?
Advertising expense 4,000 Salaries expense 14,000
Service revenue 71,000 Equipment 80,000
Required: Prepare the following financial statements for Accent Photography:
1. Income statement for the year ended December 31, 2018.
2. Statement of Owner’s equity for the year ended December 31, 2018.

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Principles of Accounting Financial Statement

3. Balance sheet at December 31, 2018.

IV. Presented here are (a) the assets and liabilities of Gotcha Covered Security Systems at
December 31, 2018, and (b) the revenues and expenses of the company for the year ended on
that date.
Land $60,000 Accounts payable $19,000
Note payable 35,000 Accounts receivable 13,000
Property tax expense 4,000 Advertising expense 12,000
Rent expense 23,000 Building 131,000
Salary expense 63,000 Cash 14,000
Salary payable 1,000 Equipment 20,000
Service revenue 189,000 Insurance expense 2,000
Supplies 3,000 Interest expense 9,000
The capital balance of Andrew Stryker, the owner, was $150,000 one year ago, at December
31, 2017. During 2018, Stryker withdrew $40,000 for personal use.
Requirements: Prepare the following financial statements and answer these questions:
1. An income statement for the year ended December 31, 2018.
2. The statement of owner’s equity for the year ended December 31, 2018.
3. The balance sheet at December 31, 2018.
4. Answer these questions about the company:
a. Was the result of operations for the year a profit or a loss? How much?
b. How much in total economic resources does the company have as it moves into the
new year? How much does the company owe? What is the dollar amount of the
owner’s equity interest in the business at the end of the year?
V. The bookkeeper of Lon Star Landscaping prepared the company’s balance sheet while the
account was ill. The balance sheet contains numerous errors. In particular, the bookkeeper
knew that the balance sheet should balance, so he plugged in the owner’s equity amount
needed to achieve this balance. The owner’s equity amount, therefore, is incorrect. All other
amounts are accurate, but some are out of place.

Lone Star Landscaping

Balance Sheet
Month Ended July 31, 2018
Assets Liabilities
Cash $4,000 Accounts receivable $23,000
Office supplies 1,000 Service revenue 73,500
Land 50,000 Property tax expense 800
salaries expense 2,500 Accounts payable 8,000
Office furniture 16,000
Note payable 36,000 Owner's Equity
Rent expense 2,500 Lynn Woodward, capital 6,700
Total assets $112,000 Total liabilities $112,000
Requirement:
Prepare the correct balance sheet, and date it correctly. Compute total assets,
total liabilities, and owner’s equity.
VI. One item is omitted in each of the following summaries of balance sheet and
income statement data for three different sole proprietorships, X, Y and Z.

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Principles of Accounting Financial Statement

Determine the amounts of the missing items, identifying each proprietorship by

letter.
Proprietorship
x y Z
Beginning of the Year:
Assets $380,000 $150,000 $199,000
Liabilities 250,000 105,000 168,000
End of the Year:
Assets 450,000 185,000 195,000
Liabilities 280,000 95,000 169,000
During the Year:
Additional investment ? 79,000 80,000
Withdrawals 90,000 83,000 ?
Revenue 195,000 ? 187,000
Expense 170,000 113,000 175,000

VII. Indicate whether the following items would appear on the balance sheet
(BS), income statement (IS), or owner’s equity statement (OE).
1. Advertising expense
2. Accounts receivable
3. Jones, drawing
4. Rent expense
5. Salaries payable
6. Supplies
7. Utility expense
8. Cash
9. Note receivable
10. Accounts payable
VIII. Indicate in the space provided by each item whether it would appear on the
income statement (IS), balance sheet (BS), or owner’s equity statement (OE):
a. _____ Service revenue g. _____ Accounts receivable
b. _____ Utility expense h. _____ Gray, Capital (ending)
c. _____ Cash i. _____ Equipment
d. _____ Accounts payable j. _____ Advertising expense
e. _____ Office supplies k. _____ Gray, Drawings
f. _____ Wage expense l. _____ Notes payable

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