(Solution Manual) Principles of Financial Accounting (chapter 1-18)

Weygandt,Kimmel,Kieso, 12

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Author(s): Weygandt, Kimmel, Kieso

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Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-1 CHAPTER 1 Accounting in Action ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Brief Exercises Do It! Exercises A Problems 1. Identify the activities and users associated with accounting . 1, 2, 3, 4, 5 1 1, 2 2. Explain the building blocks of accounting: ethics, principles, and assumptions . 6, 7, 8, 9, 10 2 3, 4 3. State the accounting equation, and define its components. 11, 12, 13, 22 1, 2, 3, 4, 5 , 8 3, 5 5 1A, 2A 4A 4. Analyze the effects of business transactions on the accounting equation. 14, 15, 16, 18 6, 7, 9 4 6, 7, 8 1A, 2A, 4A , 5A 5. Describe the four financial statements and how they are prepared. 17, 19, 20, 21 10, 11 5 9, 10, 11, 12, 13, 14, 15, 16 2A, 3A, 4A, 5A 1-2 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Analyze transactions and compute net income. Moderate 40–50 2A Analyze transactions an d prepare income statement, owner’s equity statement, and balance sheet. Moderate 50–60 3A Prepare income statement, owner’s equity statement, and balance sheet. Moderate 50–60 4A Analyze transactions and prepare financial statement s. Moderate 40–50 5A Determine financial statement amounts and prepare owner’s equity statement. Moderate 40–50 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-3 WEYGANDT ACCOUNTING PRINCIPLES 12E CHAPTER 1 ACCOUNTING IN ACTION Number LO BT Difficulty Time (min.) BE1 3 AP Simple 2–4 BE2 3 AP Simple 3–5 BE3 3 AP Moderate 4–6 BE4 3 AP Moderate 4–6 BE5 3 C Simple 2–4 BE6 4 C Simple 2–4 BE7 4 C Simple 2–4 BE8 3 C Simple 2–4 BE9 4 C Simple 1–2 BE10 5 AP Simple 3–5 BE11 5 C Simple 2–4 DI1 1 K Simple 2–4 DI2 2 K Simple 2–4 DI3 3 AP Simple 6–8 DI4 4 AP Moderate 8–10 DI5 3, 5 AP Moderate 10–12 EX1 1 C Moderate 5–7 EX2 1 C Simple 6–8 EX3 2 C Moderate 6–8 EX4 2 C Moderate 6–8 EX5 3 C Simple 4–6 EX6 4 C Simple 6–8 EX7 4 C Simple 4–6 EX8 4 AP Moderate 12–15 EX9 5 AP Simple 12–15 EX10 5 AP Moderate 8–10 EX11 5 AP Moderate 6–8 EX12 5 AP Simple 8–10 EX13 5 AN Simple 8–10 EX14 5 AP Simple 10–12 EX15 5 AP Simple 6–8 EX16 5 AP Moderate 6–8 1-4 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) ACCOUNTING IN ACTION (Continued) Number LO BT Difficulty Time (min.) P1A 3, 4 AP Moderate 40–50 P2A 3–5 AP Moderate 50–60 P3A 5 AP Moderate 50–60 P4A 3–5 AP Moderate 40–50 P5A 4, 5 AP Moderate 40–50 BYP1 5 AN Simple 10–15 BYP2 5 AN, E Simple 10–15 BYP3 BYP4 5 6 AN, E C, AN Simple Simple 10–15 15–20 BYP5 4 E Moderate 15–20 BYP6 5 E Simple 12–15 BYP7 2 E Simple 10–12 BYP8 BYP9 BYP10 2 – – E AP C Modera te Moderate Simple 15–20 15–20 10–15 Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End-of-Chapter Exercises and Problems Learning Objective Knowledge Comprehension Application Analysis Synthesis Evaluation 1. Identify the activities and users associated with accounting. DI1-1 Q1-1 Q1-2 Q1-3 Q1-4 Q1-5 E1-1 E1-2 3. Explain the building blocks of accounting: ethics, principles, and assumptions. Q1-7 Q1-8 Q1-9 Q1-10 DI1-1 Q1-6 E1-3 E1-4 3. State the accounting equ ation, and define its components. DI1-2 BE1-5 Q1-11 Q1-12 Q1-13 BE1-4 BE1-8 BE1-9 E1-5 BE1-1 BE1-2 BE1-3 DI1-5 P1-1A P1-2A P1-4A 4. Analyze the effects of business transactions on the accounting equation. Q1-14 Q1-15 Q1-16 Q1-18 BE1-6 BE1-7 E1-6 E1-7 DI1-4 E1-8 P1-1A P1-2A P1-4A P1-5A 5. Describe the four financial statements and how they are prepared. Q1-17 Q1-19 BE1-11 Q1-20 Q1-21 BE1-10 DI1-5 E1-8 E1-9 E1-10 E1-11 E1-12 E1-14 E1-15 E1-16 E1-17 P1-2A P1-3A P1-4A P1-5A E1-13 Broadening Your Perspective Real–World Focus Considering People, Planet, and Profit FASB Codification Financial Reporting Comparative Analysis All About You Comparative Analysis Decision–Making Across the Organization Communication Activity Ethics Case 1-6 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) ANSWERS TO QUESTIONS 1. Yes, this is correct. Virtually every organization and person in our society uses accounting information. Businesses, investors, creditors, government agencies, and not -for-profit organizations must use accounting information to operate effectively. 2. Accounting is the process of identifying, recording, and communicating the economic events of an organization to interested users of the information. The first step of the accounting process is therefore to identify economic events that are relevant to a particular business. Once identified and measured, the events are recorded to provide a history of the financial activities of the organization. Recording consists of keeping a chronological diary of these measured events in an orderly and systematic man ner. The information is communicated through the preparation and distribution of accounting reports, the most common of which are called financial statements. A vital element in the communication process is the accountant’s ability and responsibility to analyze and interpret the reported information. 3. (a) Internal users are those who plan, organize, and run the business and therefore are officers and other decision makers. (b) To assist management, managerial accounting provides internal reports. Examples include financial comparisons of operating alternatives, projections of income from new sales campaigns, and forecasts of cash needs for the next year. 4. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell owner - ship shares of a company. (b) Creditors use a ccounting information to evaluate the risks of granting credit or lending money. 5. No, this is incorrect. Bookkeeping usually involves only the recording of economic events and therefore is just one part of the entire accounting process. Accounting, on the other hand, involves the entire process of identifying, recording, and communicating economic events. 6. Trenton Travel Agency should report the land at $90,000 on its December 31, 201 7 balance sheet. This is true not only at the time the land is pur chased, but also over the time the land is held. In determining which measurement principle to use (cost or fair value) companies weigh the factual nature of cost figures versus the relevance of fair value. In general, companies use cost. Only in situation s where assets are actively traded do companies apply the fair value principle. An important concept that accountants follow is the historical cost principle. 7. The monetary unit assumption requires that only transaction data that can be expressed in terms of money be included in the accounting records. This assumption enables accounting to quantify (measure) economic events. 8. The economic entity assumptio n requires that the activities of the entity be kept separate and distinct from the activities of its owners and all other economic entities. 9. The three basic forms of business organizations are: (1) proprietorship, (2) partnership, and (3) corporatio n. Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-7 Questions Chapter 1 (Continued) 10. One of the advantages Rachel Hipp would enjoy is that ownership of a corporation is repre sented by transferable shares of stock. This would allow Rachel to raise money easily by selling a part of her ownership i n the company. Another advantage is that because holders of the shares (stockholders) enjoy limited liability; they are not personally liable for the debts of the corporate entity. Also, because ownership can be transferred without dissolving the corporati on, the corporation enjoys an unlimited life. 11. The basic accounting equation is Assets = Liabilities + Owner’s Equity. 12. (a) Assets are resources owned by a business. Liabilities are claims against assets. Put more simply, liabilities are existing d ebts and obligations. Owner’s equity is the ownership claim on total assets. (b) Owner’s equity is affected by owner’s investments, drawings, revenues, and expenses. 13. The liabilities are: (b) Accounts payable and (g) Salaries and wages payable. 14. Yes, a business can enter into a transaction in which only the left side of the accounting equation is affected. An example would be a transaction where an increase in one asset is offset by a decrease in another asset. An increase in the Equipment account which is offset by a decrease in the Cash account is a specific example. 15. Business transactions are the economic events of the enterprise recorded by accountants because they affect the basic accounting equation. (a) The death of the owner of the com pany is not a business transaction as it does not affect the basic accounting equation. (b) Supplies purchased on account is a business transaction as it affects the basic accounting equation. (c) An employee being fired is not a business transaction as it does not affect the basic accounting equation. (d) A withdrawal of cash from the business is a business transaction as it affects the basic accounting equation. 16. (a) Decrease assets and decrease owner’s equity. (b) Increase assets and decrease ass ets. (c) Increase assets and increase owner’s equity. (d) Decrease assets and decrease liabilities. 17. (a) Income statement. (d) Balance sheet. (b) Balance sheet. (e) Balance sheet and owner’s equity statement. (c) Income statement. (f) Balance sheet . 18. No, this treatment is not proper. While the transaction does involve a receipt of cash, it does not represent revenues. Revenues are the gross increase in owner’s equity resulting from business activities entered into for the purpose of earning inco me. This transaction is simply an additional investment made by the owner in the business. 1-8 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) Questions Chapter 1 (Continued) 19. Yes. Net income does appear on the income statement —it is the result of subtracting expenses from revenues. In addition, net income appears in the owner’s equity statement —it is shown as an addition to the beginning -of-period capital. Indirectly, the net income of a company is also included in the balance sheet. It is included in the capital account which appears in the owner’s equity section of the balance sheet. 20. (a) Ending capital balance ................................ ................................ ..................... $198,000 Beginning capital balance ................................ ................................ ................ 168,000 Net income ................................ ................................ ................................ ....... $ 30,000 (b) Ending capital balance ................................ ................................ ..................... $198,000 Beginning capital balance ................................ ................................ ................ 168,000 30,000 Deduct: Investment ................................ ................................ ......................... 13,000 Net income ................................ ................................ ................................ ....... $ 17,000 21. (a) Total revenues ($20,000 + $70,000) ................................ ................................ $90,000 (b) Total expenses ($26,000 + $40,000) ................................ ................................ $66,000 (c) Total revenues ................................ ................................ ................................ . $90,000 Total expenses ................................ ................................ ................................ . 66,000 Net income ................................ ................................ ................................ ....... $24,000 22. Apple’s accounting equation at Septe mber 2 8, 201 3 was $ 207,000,000,000 = $ 83,451,000,000 + $123,549 ,000,000. Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-9 SOLUTIONS TO BRIEF EXERCISES BRIEF EXERCISE 1 -1 (a) $90,000 – $50,000 = $40,000 (Owner’s Equity). (b) $44,000 + $70,000 = $ 114,000 (Assets). (c) $94,000 – $53,000 = $41,000 (Lia bilities). BRIEF EXERCISE 1 -2 (a) $120,000 + $232,000 = $352,000 (Total assets). (b) $190,000 – $91,000 = $99,000 (Total liabilities). (c) $800,000 – 0.5($800,000) = $400,000 (Owner’s equity). BRIEF EXERCISE 1 -3 (a) ($800,000 + $150,0 00) – ($300,000 – $60,000) = $ 710,000 (Owner’s equity). (b) ($300,000 + $100,000) + ($800,000 – $300,000 – $70,000) = $830,000 (Assets). (c) ($800,000 – $80,000) – ($800,000 – $300,000 + $120,000) = $100,000 (Liabilities). BRIEF EXERCISE 1 -4 Owner’s Equity Assets = Liabilities + Owner’s Capital – Owner’s Drawings + Revenues – Expenses (a) X = $90,000 + $150,000 – $40,000 + $450,000 – $320,000 X = $90,000 + $240,000 X = $330,000 (b) $57,000 = X + $25,000 – $7,000 + $52,000 – $35,000 $57,000 = X + $35,000 X = $22,000 ($57,000 – $35,000) (c) $600,000 = ($600,000 x 2/3) + X (Owner’s equity) $600,000 = $400,000 + X X = $200,000 1-10 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) BRIEF EXERCISE 1 -5 A (a) Accounts receivable A (d) Supplies L (b) Salaries and wages payable OE (e) Owner’s capital A (c) Equipment L (f) Notes payable BRIEF EXERCISE 1 -6 Assets Liabilities Owner’s Equity (a) + + NE (b) + NE + (c) – NE – BRIEF EXERCI SE 1 -7 Assets Liabilities Owner’s Equity (a) + NE + (b) – NE – (c) NE NE NE BRIEF EXERCISE 1 -8 E (a) Advertising expense D (e) Owner’s drawings R (b) Service revenue R (f) Rent revenue E (c) Insurance expense E (g) Utilitie s expense E (d) Salaries and wages expense BRIEF EXERCISE 1 -9 R (a) Received cash for services performed NOE (b) Paid cash to purchase equipment E (c) Paid employee salaries Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-11 BRIEF EXERCISE 1 -10 MENDOZA COMPANY Balance Sheet December 31, 2017 Assets Cash ................................ ................................ ............................... $ 49,000 Accounts receivable ................................ ................................ ..... 72,500 Total assets ................................ ................................ ............ $121,500 Liabilities and Owner’s Equity Liabilities Accounts payable ................................ ................................ .. $ 90,000 Owner’s equity Owner’s capital ................................ ................................ ...... 31,500 Total liabilities and owner’s equity ............................... $121,500 BRIEF EXERCISE 1 -11 BS (a) Notes payable IS (b) Advertising expense OE, BS (c) Owner’s capital BS (d) Cash IS (e) Service revenue SOLUTIONS FOR DO IT! REVIEW EXERCISES DO IT! 1 -1 1. False. The three steps in the accounting process are identification, recording, and communication. 2. True. 3. False. Financial accounting provides reports to help investors and creditors evaluate a company. 4. True. 5. True. 1-12 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) DO IT! 1 -2 1. False. Congress pas sed the Sarbanes -Oxley Act to reduce unethical behavior and decrease the likelihood of future corporate scandals. 2. False. The standards of conduct by which actions are judged as right or wrong, honest or dishonest, fair or not fair, are ethics. 3. False. The primary accounting standard -setting body in the United States is the Financial Accounting Standards Board (FASB). 4. True. 5. True. DO IT! 1 -3 1. Drawings is owner’s drawings (D); it decreases owner’s equity. 2. Rent Revenue is revenue (R); it incr eases owner’s equity. 3. Advertising Expense is an expense (E); it decreases owner’s equity. 4. When the owner puts personal assets into the business, it is investment by owner (I); it increases owner’s equity. DO IT! 1 -4 Assets = Liabilities + Owner’s Equity Cash + Accounts Receivable = Accounts Payable + Owner’s Capital – Owner’s Drawings + Revenues – Expenses (1) +$20,000 +$20,000 (2) +$20,000 –$20,000 (3) +$2,300 –$2,300 (4) –$ 3,600 –$3,600 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-13 DO IT! 1 -5 (a) The total assets are $ 49,000, comprised of Cash $ 6,500, Accounts Receivable $13,500, and Equipment $29,000. (b) Net income is $ 20,500, computed as follows: Revenues Service revenue ................................ .................. $53,500 Expenses Salaries and wages expense ............................. $16,500 Rent expense ................................ ...................... 10,500 Advertising expense ................................ .......... 6,000 Total expenses ................................ ........... 33,000 Net income ................................ ................................ . $20,500 (c) The ending owner’s equity balance of Kirby Company is $ 21,000. By rewriting the accounting equation, we can compute Owner’s Equity as Assets minus Liabilities, as follows: Total assets [as computed in (a)] ............................. $49,000 Less: Liabilities Notes payable ................................ ..................... $25,000 Accounts payable ................................ .............. 3,000 28,000 Owner’s equity ................................ ........................... $21,000 Note that it is not possible to determine the company’s owner’s equity in any other way, because the beginning balance for owner’s equity is not provided. 1-14 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) SOLUTIONS TO EXERCISES EXERCISE 1 -1 C Analyzing and interpreting information. R Classifying economic events. C Explaining uses, meaning, and limitations o f data. R Keeping a systematic chronological diary of events. R Measuring events in dollars and cents. C Preparing accounting reports. C Reporting information in a standard format. I Selecting economic activities relevant to the company. R Summ arizing economic events. EXERCISE 1 -2 (a) Internal users Marketing manager Production supervisor Store manager Vice-president of finance External users Customers Internal Revenue Service Labor unions Securities and Exchange Commission Suppliers (b) I Can we afford to give our employees a pay raise? E Did the company earn a satisfactory income? I Do we need to borrow in the near future? E How does the company’s profitability compare to other companies? I What does it cost us to manufact ure each unit produced? I Which product should we emphasize? E Will the company be able to pay its short -term debts? Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-15 EXERCISE 1 -3 Angela Duffy , president of Duffy Company, instructed Jana Barth , the head of the accounting department, to report t he company’s land in its accounting reports at its fair value of $170,000 instead of its cost of $100,000, in an effort to make the company appear to be a better investment. The historical cost principle requires that assets be recorded and reported at their cost, because cost is faithfully representative and can be objectively measured and verified. In this case, the historical cost principle should be used and Land reported at $100,000, not $170,000. The stakeholders include stockholders and creditors of Duffy Company, potential stockholders and creditors, other users of Duffy ’s accounting reports, Angela Duffy , and Jana Barth . All users of Duffy ’s accounting reports could be harmed by relying on information that may be unreliable. Angela Duffy could bene fit if the company is able to attract more investors, but would be harmed if the inappropriate reporting is discovered. Similarly, Jana Barth could benefit by pleasing her boss, but would be harmed if the inappropriate reporting is discovered. Jana ’s alternatives are to report the land at $100,000 or to report it at $170,000. Reporting the land at $170,000 is not appropriate since it may mislead many people who rely on Duffy ’s accounting reports to make finan - cial decisions. Jana should report the land at its cost of $100,000. She should try to convince Angela Duffy that this is the appropriate course of action, but be prepared to resign her position if Duffy insists. EXERCISE 1 -4 1. Incorrect. The historical cost principle requires that assets (such as buildings) be recorded and reported at their cost. 2. Correct. The monetary unit assumption requires that companies include in the accounting records only transaction data that can be expressed in terms of money. 3. Incorrect. The economic entity assumption requires that the activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities. 1-16 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) EXERCISE 1 -5 Asset Liability Owner’s Equity Cash Accounts payable Owner’s capital Equipment Notes payable Supplies Accounts receivable Salaries and wages payable EXERCISE 1 -6 1. Increase in assets and increase in owner’s equity. 2. Decrease in assets and decrease in owner’s equi ty. 3. Increase in assets and increase in liabilities. 4. Increase in assets and increase in owner’s equity. 5. Decrease in assets and decrease in owner’s equity. 6. Increase in assets and decrease in assets. 7. Increase in liabilities and decrease in owne r’s equity. 8. Increase in assets and decrease in assets. 9. Increase in assets and increase in owner’s equity. EXERCISE 1 -7 1. (c) 5. (d) 2. (d) 6. (b) 3. (a) 7. (e) 4. (b) 8. (f) EXERCISE 1 -8 (a) 1. Owner invested $15,000 cash in the business. 2. Purchased equipment for $5,000, paying $2,000 in cash and the balance of $3,000 on account. 3. Paid $750 cash for supplies. 4. Performed $8,500 of services , receiving $4,600 cash and $3,900 on account. 5. Paid $1,500 cash on accounts payable. Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-17 EXERCISE 1-8 (Continued) 6. Owner withdrew $2,000 cash for personal use. 7. Paid $650 cash for rent. 8. Collected $450 cash from customers on account. 9. Paid salaries and wages of $4,800. 10. Incurred $ 400 of utilities expense on account. (b) Investment ................................ ................................ ............... $15,000 Service revenue ................................ ................................ ...... 8,500 Drawings ................................ ................................ ................. (2,000 ) Rent expense ................................ ................................ .......... (650) Salaries and wages expense ................................ ................. (4,800 ) Utilities expense ................................ ................................ ..... (400) Increase in owner’s equity ................................ ..................... $15,650 (c) Service revenue ................................ ................................ ...... $8,500 Rent expense ................................ ................................ .......... (650) Salaries and wag es expense ................................ ................. (4,800) Utilities expense ................................ ................................ ..... (400) Net income ................................ ................................ .............. $2,650 EXERCISE 1 -9 ARTHUR COOPER & CO. Income Statement For the Month Ended August 31, 2017 Revenues Service revenue ................................ ......................... $8,500 Expenses Salaries and wages expense ................................ .... $4,800 Rent expens e ................................ ............................. 650 Utilities expense ................................ ........................ 400 Total expenses ................................ ................... 5,850 Net income ................................ ................................ ......... $2,650 1-18 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) EXERCISE 1 -9 (Continued) ARTHUR COOPER & CO. Owner’s Equity Statement For the Month Ended August 31, 2017 Owner’s capital, August 1 ................................ ............ $ 0 Add: Investments ................................ ....................... $15,000 Net income ................................ ......................... 2,650 17,650 17,650 Less: Drawings ................................ ............................ 2,000 Owner’s capital, August 31 ................................ .......... $15,650 ARTHUR COOPER & CO. Balance Sheet August 31, 2017 Assets Cash ................................ ................................ ............................... $ 8,350 Accounts receivable ................................ ................................ ...... 3,450 Supplies ................................ ................................ ......................... 750 Equipment ................................ ................................ ...................... 5,000 Total assets ................................ ................................ ............ $17,550 Liabilities and Owner’s Equity Liabilities Accounts payable ................................ ................................ .. $ 1,900 Owner’s equity Owner’s capital ................................ ................................ ...... 15,650 Total liabilities and owner’s equity ............................... $17,550 EXERCISE 1 -10 (a) Owner’s equity —12/31/ 16 ($400,000 – $250,000) ................. $150 ,000 Owner’s equity —1/1/16 ................................ .......................... 100,000 Increase in owner’s equity ................................ .................... 50,000 Add: Drawings ................................ ................................ ..... 15,000 Net income for 2016 ................................ ............................... $ 65,000 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-19 EXERCISE 1 -10 (Continued) (b) Owner’s equity —12/31/ 17 ($460,000 – $300,000) ............... $160,000 Owner’s equity —1/1/17—see (a) ................................ ......... 150,000 Increase in owner’s equity ................................ .................. 10,000 Less: Additional investment ................................ .............. 45,000 Net loss for 2017 ................................ ................................ .. $ (35,000 ) (c) Owner’s equity —12/31/ 18 ($590,000 – $400,000) ............... $190,000 Owner’s equity —1/1/18—see (b) ................................ ......... 160,000 Increase in owner’s equi ty ................................ .................. 30,000 Less: Additional investment ................................ .............. 15,000 15,000 Add: Drawings ................................ ................................ ... 25,000 Net income for 2018 ................................ ............................. $ 40,000 EXERCISE 1 -11 (a) Total assets (beginning of year) ................................ ......... $110,000 Total liabilities (beginning of year) ................................ ..... 85,000 Total owner’s equity (beginning of year) ........................... $ 25,000 (b) Total owner’s equity (end of year) ................................ ...... $ 40,000 Total owner’s equity (beginning of year) ........................... 25,000 Increase in owner’s equity ................................ .................. $ 15,000 Total revenues ................................ ................................ ..... $220,000 Total expenses ................................ ................................ ..... 175,000 Net income ................................ ................................ ........... $ 45,000 Increase in owner’s equity ............................. $ 15,000 Less: Net income ................................ ........... $(45,000) Add: Drawings ................................ .............. 37,000) (8,000) Additional investment ................................ .... $ 7,000 (c) Total assets (beginning of year) ................................ ......... $129,000 Total owner’s equity (beginning of year) ........................... 80,000 Total liabilities (beginning of year) ................................ ..... $ 49,000 1-20 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) EXERCISE 1 -11 (Continued) (d) Total owner’s equity (end of year) ................................ ...... $130,000 Total owner’s equity (beginning of year) ........................... 80,000 Increase in owner’s equity ................................ .................. $ 50,000 Total revenues ................................ ................................ ..... $100,000 Total expenses ................................ ................................ ..... 60,000 Net income ................................ ................................ ........... $ 40,000 Increase in owner’s equity ............................. $ 50,000 Less: Net income ................................ ........... $(40,000) Additional investment ......................... (25,000 ) (65,000 ) Drawings ................................ ......................... $ 15,000 EXERCISE 1-12 ARMANDA CO. Income Statement For the Year Ended December 31, 2017 Revenues Service revenue ................................ .................... $63,600 Expenses Salaries and wages expense ................................ $29,500 Rent expense ................................ ........................ 10,400 Utilities expense ................................ ................... 3,100 Advertising expense ................................ ............. 1,800 Total expenses ................................ .............. 44,800 Net income ................................ ................................ .... $18,800 ARMANDA CO. Owner’s Equity Statement For the Year Ended December 31, 2017 Owner’s capital, January 1 ................................ ............................. $48,000 Add: Net income ................................ ................................ ............ 18,800 66,800 Less: Drawings ................................ ................................ ............... 6,000 Owner’s capital, December 31 ................................ ........................ $60,800 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-21 EXERCISE 1 -13 CHENG COMPANY Balance Sheet December 31, 2017 Assets Cash ................................ ................................ ............................... $15,000 Accounts receivable ................................ ................................ ..... 6,500 Supplies ................................ ................................ ......................... 8,000 Equipment ................................ ................................ ...................... 46,000 Total assets ................................ ................................ ............ $75,500 Liabilities and Owner’s Equity Liabilities Accounts payable ................................ ................................ .. $21,000 Owner’s equity Owner’s capital ($67,500 – $13,000) ................................ ..... 54,500 Total liabilities and owner’s equity ............................... $75,500 EXERCISE 1 -14 (a) Camping fee revenues ................................ .......................... $140,000 General store revenues ................................ ......................... 65,000 Total revenue ................................ ................................ .. 205,000 Expenses ................................ ................................ ................ 150,000 Net income ................................ ................................ ............. $ 55,000 (b) CLEAR VIEW PARK Balance Sheet December 31, 2017 Assets Cash ................................ ................................ ........................ $ 23,000 Accounts Receivable ................................ ............................. 17,500 Equipment ................................ ................................ .............. 105,500 Total assets ................................ ................................ .... $146,000 1-22 Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) EXERCISE 1 -14 (Continued) CLEAR VIEW PARK Balance Sheet (Continued) December 31, 2017 Liabilities and Owner’s Equity Liabilities Notes payable ................................ ................................ . $ 60,000 Accounts payable ................................ ........................... 11,000 Total liabilities ................................ ......................... 71,000 Owner’s equity Owner’s capital ($146,000 – $71,000) ............................ 75,000 Total liabilities and owner’s equity ........................ $146,000 EXERCISE 1 -15 SEA LEGS CRUISE COMPANY Income Statement For the Year Ended December 31, 2017 Revenues Ticket revenue ................................ .................. $410,000 Expenses Salaries and wages expense ........................... $142,000 Maintenance and repairs expense .................. 95,000 Advertising expense ................................ ........ 24,500 Utilities expense ................................ .............. 13,000 Total expenses ................................ ......... 274,500 Net income ................................ ............................... $135,500 EXERCISE 1 -16 ALICE HENNING , ATTORNEY Owner’s Equity Statement For the Year Ended December 31, 2017 Owner’s capital, January 1 ................................ .................... $ 34,000 (a) Add: Net income ................................ ................................ ... 124,000 (b) 158,000 Less: Drawings ................................ ................................ ...... 90,000 Owner’s capital, December 31 ................................ ............... $ 68,000 (c) Copyright © 201 5 John Wiley & Sons, Inc. Weygandt, Accounting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-23 EXERCISE 1 -16 (Continued) Supporting Computations (a) Assets, January 1, 2017 ................................ ........................ $ 96,000 Liabilities, January 1, 2017 ................................ .................... 62,000 Capita l, January 1, 2017 ................................ ........................ $ 34,000 (b) Legal service revenue ................................ ........................... $335,000 Total expenses ................................ ................................ ....... 211,000 Net income ................................ ................................ ............. $124,000 (c) Assets, December 31, 2017 ................................ ................... $168,000 Liabilities, December 31, 2017 ................................ .............. 100,000 Capital, December 31, 2017 ................................ ................... $ 68,000 (a) SPENGEL’S TRAVEL AGENCY Owner’s Equity Cash + Accounts Receivable + Supplies + Equipment = Accounts Payable + Owner’s Capital – Owner’s Drawings + Revenues – Expenses 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. +$15,000 + 15,000 + –600 + 14,400 + –3,000 + 11,400 +000,000 + 11,400 + –900 + 10,500 – +3,000 + 13,500 + –600 + 12,900 + –500 + 12,400 + –2,500 + 9,900 – +4,000 +$13,900 + + + + + +$7,000 + 7,000 + 0,000 + 7,000 + 0,000 + 7,000 + 0,000 + 7,000 +–4,000 +$3,000 + + + + + + +$900 + 900 +0000 + 900 +0000 + 900 +0000 + 900 +0000 + 900 + +$900 + + + + + + + + +$3,000 + 3,000 +00,000 + 3,000 +00,000 + 3,000 +00,000 + 3,000 +00,000 + 3,000 +00,000 + 3,000 +00,000 + 3,000 + +$3,000 = = = = = = = = = = +$700 + 700 +0000 + 700 +0000 + 700 +0000 + 700 +–500 200 +0000 200 +$200 + + + + + +$15,000 + 15,000 + + 15,000 +000,000 + 15,000 + + 15,000 +000,000 + 15,000 – + 15,000 + + 15,000 +000,000 + 15,000 + 15,000 +$15,000 – –$600 –600 –600 –600 $600 + +$10,000 10,000 10,000 10,000 10,000 $10,000 – –$600 –600 –600 –700 –1,300 –1,300 –1,300 –1,300 –1,300 –2,500 –3,800 $3,800 $20,800 $20,800 Copyright © 20 15 John Wiley & Sons, Inc. Weygandt, Accoun ting Principles, 12/e, Solutions Manual (For Instructor Use Only) 1-25 PROBLEM 1-1A (Continued) (b) Service revenue ................................ ...................... $10,000 Expenses Salaries and wages ................................ ......... $2,500 Rent ................................ ................................ .. 600 Advertising ................................ ...................... 700 3,800 Net income ................................ ............... $ 6,200