A number of business transactions carried out by Overnight Auto Service are as follows Jan.

20 Michael McBryan started the business by depositing 80000 received from the sale of capital stock in a company bank account. Jan.21 Purchased land for 52000, paying cash. Jan.22 Purchased a building for 36000, paying 6000 in cash and issuing a note payable for the remaining 30000. Jan.23 Purchased tools and equipment on account, 13800. Jan.24 Sold some of the tools at a price equal to their cost, 1800, collectible within 45 days. Jan.26 Received 600 in partial collection of the account receivable from the sale of tools. Jan.27 Paid 6800 in partial payment of an account payable. Jan.31 Recorded 2200 of sales revenue received in cash. Jan.31 Paid 1400 of operating expenses in cash - 200 for utilities and 1200 for wages. Required a.Prepare the income statement of Overnight Auto Service for the month ended January 31, 2008. b.Prepare the statement of Retained Earnings at January 31, 2008. c.Prepare the company's balance sheet at January 31, 2008. Assets cash 80,000 -52,000 -6,000 accts rec. land 52,000 36,000 1800 -600 13,800 13,800 -1,800 -6,800 building tools and equip. Liabilities accts pay

Jan.20 Jan.21 Jan.22 Jan.23 Jan.24 Jan.26 Jan.27 Jan.31 Jan.31 Bal.

600 -6,800 2,200 -1,400 16,600

1,200

52,000

36,000

12,000

7,000

Overnight Auto Service Income Statement month ended January 31, 2008 revenues sales rev 2,200 expenses wages 1,200 utilities 200 1,400 net income 800 Overnight Auto Service Statement of Retained Earnings month ended January 31, 2008 RE, Jan.20 Add: Net Income subtotal less dividends RE, Dec 31

800 800 800

Overnight Auto Service Balance Sheet January 31, 2008 assets liabilities cash 16,600 accounts pay 7,000 accts rec 1,200 notes payable 30,000 land 52,000 37,000 building 36,000 owner's equity tools and equip 12,000 capital stock 80,000 ret earnings 800 total 117,800 total 117,800

ht Auto Service are as follows 000 received from the sale of

d issuing a note payable for

0, collectible within 45 days. ble from the sale of tools.

es and 1200 for wages.

he month ended January 31, 2008.

Liabilities notes pay

Owner's Equity capital retained stock earnings 80,000

30,000

2,200 -1,400 30,000 80,000 800

A number of business transactions carried out by JJs Lawn Care Service are as follows

May1 Jill Jones and her family invested 8000 in JJ's Lawn Care Service and received 800 shares of stock. May2 Purchased a riding lawn mower for 2500 cash. May8 Purchased a truck for 15000, paying 2000 in cash and issuing a note payable for the remaining 13000. May11Purchased some repair parts for 300 on account. May18Sold half of the repair parts at a price equal to their cost, 150, collectible within 30 days. May25Received 75 in partial collection of the account receivable from the sale of repair parts. May28Paid 150 of its accounts payable. May29Recorded lawn care services provided during May of 750. All clients paid in cash. May31Purchased gasoline for the lawn mower and the truck for 50 cash.
Required a.Prepare the income statement of JJ's Lawn Care Service for the month ended May 31, 2007. b.Prepare the statement of Retained Earnings at May 31, 2007. c.Prepare the company's balance sheet at May 31, 2007.
Assets accounts tools and equip 2,500 15,000 300 150 75 -150 750 -50 4,125 75 2,650 15,000 13,000 150 8,000 -75 -150 750 -50 700 -150 300 13,000 truck cash 8,000 -2,500 -2,000 rec Liabilities accounts payable notes payable Owner's Equity capital stock 8,000 retained earnings

May1 May2 May8 May11 May18 May25 May28 May29 May31 Bal.

JJ's Lawn Care Service Income Statement month ended May 31, 2007 revenues sales rev expenses wages net income JJ's Lawn Care Service Statement of Retained Earnings month ended May 31, 2007 RE, May 1 Add: Net Income less dividends RE, May 31

750 50 700

700 700

JJ's Lawn Care Service Balance Sheet May 31, 2007 assets liabilities

cash accts rec tools and equip truck

total

4,125 accounts pay 150 75 notes payable 13,000 2,650 13,150 15,000 owner's equity capital stock 8,000 ret earnings 700 21,850 total 21,850

ctible within 30 days. sale of repair parts.

The followings are the balances in the accounts of Paul's Delivery Service on August 31, 200. Accounts Payable $ 260 Salaries Payable 240 Accounts Receivable 220 Salaries Expense 500 Capital Stock 1,160 Service Revenue 3,210 Equipment 2,980 Supplies 180 Notes Payable 190 Supplies Expense 280 Notes Receivable 130 Telephone Expense 270 Retained Earnings ? Truck Rental Expense 500 Required a.Prepare the income statement for Paul's Delivery Service for the month of August, 2007. b.Prepare the company's balance sheet at August 31, 2007. Paul's Delivery Service Income Statement month ended August 31, 2007 revenues service revenue expenses salaries truck rental supplies telephone net income 3,210 500 500 280 270

1,550 1,660

Paul's Delivery Service Balance Sheet August 31, 2006 assets liabilities accounts receivable 220 accounts payable notes receivable 130 notes payable supplies 180 salaries payable equipment 2,980 total owner's equity capital stock retained earnings total 3,510 total

260 190 240 690 1,160 1,660 3,510

The following items are listed in alphabetical order Accounts payable $19,000 Note payable Accounts receivable 12,000 Property tax expense Advertising expense 13,000 Rent expense Building 170,000 Retained earnings 114,000 Salary expense Capital stock Cash 14,000 Salary payable Equipment 20,000 Service revenue Insurance expense 2,000 Supplies Interest expense 9,000 Utilities expense Land 60,000

85,000 4,000 23,000 ? 63,000 1,000 178,000 3,000 4,000

Required Prepare the income statement of Ping Technology for the year ended December 31, 2007. Prepare the company's balance sheet at December 31, 2007. Ping Technology Income Statement Year Ended December 31, 2007 Revenues Service revenue Expenses Salary expense Rent expense Advertising expense Interest expense Utilities expense Property tax expense Insurance expense Total expenses Net Income $178,000 $63,000 23,000 13,000 9,000 4,000 4,000 2,000 118,000 $60,000 Ping Technology Balance Sheet 31-Dec-07 Assets Cash Accounts receivable Supplies Equipment Building Land Total assets Liabilities Accounts payable Salary payable Notes payable Owner's Equity Capital stock Retained earnings Total liabilities $279,000 and Owner's equity $ 14,000 12,000 3,000 20,000 170,000 60,000 $ 19,000 1,000 85,000 114,000 60,000 $279,000

The following amounts summarize the financial position of Peavy Design on April 30, 2007. Assets Liabilities Owner's Equity accounts accounts capital retained cash receivable supplies land payable stock earnings 1.720 3.240 24.100 5.400 23.600 During May 2007, following events occurred. May a Received $12,000 and deposited the cash in the business bank account from the sale of capital stock. b Paid off the beginning balance of accounts payable c Performed service for a client and received cash of $1,100. d Collected cash from a customer on account, $750. e Purchased supplies on account, $720. f Consulted on the interior design of a major office building and billed the client for services rendered,$5,000. g Received $1,700 from the sale of capital stock. h Paid cash expenses: office rent, $1,200; advertising, $660; employees, $4,000. i Sold supplies to another interior designer for $80 cash.

Required Analyze the effects of the preceding transactions on the accounting equation. Prepare the income statement of Peavy Design for the month ended May 31, 2007. Prepare the company's balance sheet at May 31, 2007.

Bal. May a b c d e f g h h h i Bal.

cash 1.720 12.000 -5,400 1.100 750

Assets accounts receivable supplies 3.240

land 24.100

Liabilities Owner's Equity accounts capital retained payable stock earnings 5.400 23,660 12,000 -5,400 1,100

-750 720 5,000 720 5,000 1,700 -1,200 -660 -4000 7.490 -80 640 24.100 720 37,360 240

1.700 -1,200 -660 -4000 80 6.090

Peavy Design Income Statement Month Ended May 31, 2007 Revenues: Service revenue $6,100 Expenses Rent $1,200 Advertising 660 Salaries 4,000 5,860 Net Income $240

Peavy Design Balance Sheet 31-May-07 Assets Cash Accounts Receivable Supplies Land Liabilities $6,090 Accounts payable 7.490 640 Owner's Equity 24.100 Capital stock retained earnings Total liabilities $38,320 and Owner's equity $720

37,360 240 $38,320

Total assets

Account balances for Crystal Auto Wash at September 30, 2007, are shown below. The figure for retained earnings is not given. Accounts Payable $ 14,000 Machinery & Equip 65,000 Accounts Receivable 800 Notes Payable $ 29,000 Buildings 52,000 Retained Earnings ? Cash 9,200 Salaries Payable 3,000 Capital Stock 100,000 Supplies 400 Land 68,000 Required a.Prepare a balance sheet at September 30, 2007. Crystal Auto Wash Balance Sheet September 30, 2007 assets cash accts receivable supplies land buildings machinery & equip total 9,200 800 400 68,000 52,000 65,000 liabilities accounts payable notes payable salaries payable 14,000 29,000 3,000 46,000

owner's equity capital stock 100,000 retained earnings* 49,400 195,400 total 195,400

*computed as 195400 (total assets) - 46000 (total liabilities) = 149000 (o's equity); 149400 - 100000 (capital stock) = 49400

Goldstar Communications was organized on December 1, 2007 and had the following account balances at December 31, listed in tabular form: Assets Liabilities office accts cash land building equip. pay Bal. 37,000 95,000 125,000 51,250 28,250

notes pay 80,000

Owner's Equity capital stock 200,000

Early in January the following transactions were carried out by Goldstar Communications 1 Sold capital stock to owners for 35000. 2 Purchased land and small office building for a total price of 90000, of which 35000 was the value of the land and 55000 was the value of building. Paid 22500 in cash and signed a note payable for the remaining 67500. 3 Bought several computer systems on credit for 9500. (30-day open account) 4 Obtained a loan from Capital Bank in the amout of 20000. Signed a note payable. 5 Paid the 28250 account payable due as of December 31. Required a.List the December 31 balances of assets, liabilities, and owner's equity in tabular form as shown. b.Prepare the company's balance sheet at January 31, 2007.

cash Bal. 37,000 1 35,000 2 -22,500 3 4 20,000 5 -28,250 41,250

land 95,000 35,000

Assets building office equip. 125,000 51,250 55,000 9,500

130,000

180,000

60,750

Liabilities Owner's Equity accts pay notes pay capital stock 28,250 80,000 200,000 35,000 67,500 9,500 20,000 -28250 9,500 167,500 235,000

Goldstar Communications Balance Sheet 31-Dec-07 Assets Liabilities Cash 41,250 Accounts payable 9,500 Land 130,000 Notes Payable 167,500 Building 180,000 Owner's Equity Office Equip. 60,750 Capital stock 235,000 Total liabilities & 412,000 Owner's equity

Total assets

$412,000

Given Data P02-05: Accounts Payable Accounts Receivable Animals Cages Capital Stock Cash Costumes HERE COME THE CLOWNS! $ 26,100 Notes Payable 7,450 Note Receivable 189,060 Props and Equipment 24,630 Retained Earnings 310,000 Salaries Payable ? Tents 31,500 Trucks & Wagons $ 180,000 9,500 89,580 27,230 9,750 63,000 105,840

a.prepare a balance sheet by using these items and computing the amount of cash at June 30, 2007. HERE COME THE CLOWNS! Balance Sheet June 30, 2007 Liabilities & Stockholders' Equity $32,520 Liabilities: 9,500 Notes payable $180,000 7,450 Accounts payable 26,100 189,060 Salaries payable 9,750 24,630 Total liabilities $215,850 31,500 Stockholders' equity: 89,580 Capital stock $310,000 63,000 Retained earnings 27,230 337,230 105,840 $553,080 Total $553,080
^ Correct! ^ Correct!

Assets Cash* Notes receivable Accounts receivable Animals Cages Costumes Props and equipment Tents Trucks & wagons Total

*computed as 215850 (total liabilities) + 337230 (o's equity) - 520560 (total assets) 32520 b.Explain what changes would be required in your June 30 balance sheet to reflect the loss of an uninsured tent that cost $14,300. The loss of an asset, Tents, from a fire would require a revised balance sheet that reflects a decrease in total assets. When total assets are decreased, the other balance sheet total (that is, the total of liabilities and owner's' equity) must also decrease. Since there is no change in liabilities as a result of the destruction of an asset, the decrease on the right-hand side of the balance sheet must be in owners' equity - specifically, the retained earnings account. The amount of the decrease in the assets Tents, in Retained earnings, and in both balance sheet totals, is $14,300.

Given Data P02-06: The following list of balance sheet items are in random order for Wilson Farms, Inc., at September 30, 2007: WILSON FARMS, INC. Land $ 490,000 Fences and Gates 33,750 Barns and Sheds 78,300 Irrigation System 20,125 Notes Payable 330,000 Cash 16,710 Accounts Receivable 22,365 Livestock 120,780 Citrus Trees 76,650 Farm Machinery 42,970 Accounts Payable 77,095 Retained Earnings ? Property Taxes Payable 9,135 Wages Payable 5,820 Capital Stock 290,000 a.prepare a balance sheet by using these items and computing the amount for retained earnings. WILSON FARMS, INC Balance Sheet September 30, 2007 Liabilities & Stockholders' Equity $ 16,710 Liabilities: 22,365 Notes payable 120,780 Property Taxes Payable 42,970 Wages Payable 20,125 Total liabilities 33,570 Stockholders' equity: 76,650 Capital stock $ 290,000 78,300 Retained earnings* 266,515 490,000 901,470 Total
^ Correct!

Assets Cash Accounts receivable Livestock Farm Machinery Irrigation System Fences and Gates Citrus trees Barns and Sheds Land Total

$330,000 9,135 5,820 $344,955

556,515 $901,470
^ Correct!

*computed as 901470 (total assets) - 344955 (total liabilities) = 556515 (o's equity); 556515 - 290000 (capital stock) = 266515 b.Explain what changes would be required in your June 30 balance sheet to reflect the loss of an uninsured tent that cost $14,300. The loss of an asset, Tents, from a fire would require a revised balance sheet that reflects a decrease in total assets. When total assets are decreased, the other balance sheet total (that is, the total of liabilities and owner's' equity) must also decrease. Since there is no change in liabilities as a result of the destruction of an asset, the decrease on the right-hand side of the balance sheet must be in owners' equity - specifically, the retained earnings account. The amount of the decrease in the assets Tents, in Retained earnings, and in both balance sheet totals, is $14,300.

Given Data P02-08: THE SWEET SODA SHOP The balance sheet items of The Sweet Soda Shop were as follows at the close of business on September 30, 2007. Accounts Payable $ 8,500 Furniture & Fixtures $ 20,000 Accounts Receivable 1,250 Land 55,000 Building 45,500 Notes Payable ? Cash 7,400 Retained Earnings 4,090 Capital Stock 50,000 Supplies 3,440 The transactions occuring during the first week of October were: Cash received for stock $ 30,000 Purchase price of furniture 18,000 Cash paid for supplies 1,000 Cost of supplies under normal circumstances 1,875 Revenues earned and paid in cash 5,500 Expenses incurred and paid in cash 4,000 Required a.Prepare a balance sheet at September 30, 2007. b.Prepare a balance sheet at October 6, 2007. Also prepare an income statement. THE SWEET SODA SHOP Balance Sheet September 30, 2007 Assets Liabilities & Owners' Equity Cash $ 7,400 Liabilities: Accounts receivable 1,250 Notes payable $ 70,000 Supplies 3,440 Accounts payable 8,500 Land 55,000 Total liabilities $ 78,500 Building 45,500 Owners' equity: Furniture & fixtures 20,000 Capital stock 50,000 Retained earnings 4,090 Total $ 132,590 Total $ 132,590
^ Correct! ^ Correct!

THE SWEET SODA SHOP Balance Sheet October 6, 2006 Assets Liabilities & Owners' Equity Cash $ 29,400 Liabilities: Accounts receivable 1,250 Notes payable $ Supplies 4,440 Accounts payable 18,000 Land 55,000 Total liabilities $ 18,000 Building 45,500 Owners' equity: Furniture & fixtures 38,000 Capital stock 30,000 Retained earnings 1,500 Total $ 173,590 Total $ 49,500
^ Correct! ^ Try again!

THE SWEET SODA SHOP Income Statement For the Period October 1-6, 2005 Revenues Expenses $ 5,500 4,000

Net income

1,500

c. Assume the note payable does not come due for several years. Is The Sweet Soda Shop in a stronger financial position on Sept. 30 or October 6? Explain briefly. The Sweet Soda Shop is in a stronger financial position on October 6 than on September 30. On September 30, the company had highly liquid assets (cash and accounts receivable) of $8,650, which barely exceeded the $8,500 in liabilities (accounts payable) due in the near future. On October 6, after the additional investment of cash stockholders, the company's cash alone exceeded its short-term obligations.

Given Data P02-09: BERKELEY PLAYHOUSE Balance Sheet September 30, 2007 Liabilities & Owners' Equity 21,900 Liabilities: 132,200 Accounts Payable 3,000 Salaries Payable 27,000 Total Liabilities 9,400 Owner's equity 15,000 Helen Berkeley, Capital 208,500 Total

Assets Cash $ Accounts Receivable Props and Costumes Theater Building Lighting Equipment Automobile Total $

$ $

6,000 29,200 35,200 50,000 85,200

You discover the following facts: (1) Cash in company bank account $ Cash in company safe Cash in personal savings account (2) Artistic Tours receivable Estimate of future ticket sales (3) Cost of props and costumes Cash paid for props and costumes Note to Actors' Supply Co. (4) Monthly rent on theater building Purchase price of theater building (5) Purchase price of lighting equipment Current value of lighting equipment (6) Purchase price of Jaguar Listed sales price of similar Jaguar (7) Business debts Balance on personal VISA (8) Salary offered to Mario Dane Salary owed to stage hands (9) Original investment in business Recent offer to purchase

15,000 1,900 5,000 7,200 125,000 18,000 3,000 15,000 3,000 135,000 9,400 0 9,000 15,000 3,900 2,100 25,000 4,200 20,000 50,000

a.Prepare a corrected balance sheet for Berkeley Playhouse at September 30, 2006 BERKELEY PLAYHOUSE Balance Sheet September 30, 2006 Liabilities & Owners' Equity $16,900 Liabilities: 7,200 Notes payable 18,000 Accounts payable 9,400 Salaries payable Total liabilities Owner's equity: Helen Berkeley, capital $51,500 Total $
^ Correct! ^ Correct!

Assets Cash Accounts receivable Props and costumes Lighting equipment

$15,000 3,900 4,200 $23,100 28,400 51,500

Total

b. For each of the nine numbered items above, explain your reasoning in deciding whether or not to include the items in the balance sheet and in determining the proper dollar value. (1) The cash in Berkeley's personal savings account is not an asset of the business entity Berkeley Playhouse. Therefore it should not appear in the balance sheet of the business. The money on deposit in the business bank account ($15,000) and in the company safe ($1,900) constitute cash owned by the business. It is not necessary to state separately in the balance sheet amounts of cash at different locations; thus, the cash owned by the business at September 30 totals $16,900. (2) Only the amount receivable from Artistic Tours ($7,200) should be included in the company's accounts receivable as of September 30. The amounts expected from future tickets sales do not relate to completed transactions and not yet assets of the business. (3) The props and costumes should be shown in the balance sheet at their cost, $18,000 not at just the portion of the cost that was paid in cash. The $15,000 note payable is a debt of the business arising from a completed purchase transaction. Therefore, it should be included among the company's liabilities. The date at which this liability must be paid is not relevant. (4) The theater building is not owned by Berkeley Playhouse. Therefore, it is not an asset of this business entity and should not appear in the balance sheet. (5) The lighting equipment is an asset of the business and should be valued in the balance sheet at its cost, $9,400. (6) As the automobile is not used in the business, it appears to be Berkeley's personal asset rather than an asset of the business entity. Therefore, it should not be included in the balance sheet of the business. (Note: The advertised sales price of a similar automobile would not be an appropriate valuation figure even if the automobile were to be included.) (7) The accounts payable should be limited to the debts of the business, $3,900, and should not include Berkeley's personal liabilities. (8) The amount owed to stagehands for work done through September 30 is the result of completed transactions and should be included among the liabilities of the business. Even if agreement has been reached with Mario Dane, he has not yet performed and, therefore, is not yet owed any money. Thus, this $25,000 is not yet a liability of the business. (9) Owner's equity is not valued at either the original amount invested or at the estimated market value of the business. In fact, owner's equity cannot be valued independently of the values assigned to assets and liabilities. Rather, it is a residual figure - the excess of total assets over total liabilities. (If liabilities exceed assets, owner's equity would be a negative amount.) Thus, the amount of Berkeley's capital should be determined by subtracting the corrected figure for total liabilities ($23,100) from the corrected amount of total assets ($51,500). This indicates owner's equity of $28,400.

The following items are listed in alphabetical order Accounts Payable $3,250 Notes Receivable 1,000 Accounts Receivable 1,800 Retained Earnings 6,550 Advertising Expense 500 Salaries Expense 1,750 Building 55,000 Salaries Payable 250 Capital Stock 60,775 Sales Revenue 12,000 Cash 8,200 Supplies 2,325 Equipment 6,600 Supplies Expense 2,900 Interest Expense 200 Utilities Expense 100 Interest Receivable 1,100 Vans 4,000 Notes Payable 13,000 Vehicle 3,800 Required a.Prepare the income statement of The Oven Bakery for the month ended September 30, 2007. b.Prepare the statement of Retained Earnings at September 30, 2007. c.Prepare the company's balance sheet at September 30, 2007. The Oven Bakery Income Statement month ended September 30, 2007 revenues sales revenue expenses advertising interest salaries supplies utilities net income 12,000 500 200 1,750 2,900 100

5,450 6,550

The Oven Bakery Statement of Retained Earnings month ended September 30, 2007 RE, May 1 Add: Net Income less dividends RE, May 31

6,550 6,550

The Oven Bakery Balance Sheet September 30, 2007 assets cash accounts receivable notes receivable interest receivable supplies equipment building vans vehicle liabilities 8,200 accounts payable 1,800 notes payable 1,000 salaries payable 1,100 2,325 owner's equity 6,600 capital stock 55,000 retained earnings 4,000 3,800 3250 13,000 250 16,500 60,775 6550

total

83,825 total

83,825

The following items are listed in alphabetical order Accounts Payable $1,250 Notes Receivable 1,000 Accounts Receivable 1,800 Retained Earnings 7,650 Advertising Expense 500 Salaries Expense 750 Building 52,000 Salaries Payable 250 Capital Stock 59,675 Sales Revenue 11,000 Cash 6,200 Supplies 2,325 Equipment 5,600 Supplies Expense 1,800 Interest Expense 200 Utilities Expense 100 Interest Receivable 1,100 Vans 4,000 Notes Payable 9,000 Vehicle 3,800 Required a.Prepare the income statement of Shoe Metro for the month ended August 31, 2007. b.Prepare the statement of Retained Earnings at August 31, 2007. c.Prepare the company's balance sheet at August 31, 2007. Shoe Metro Income Statement month ended August 31, 2007 revenues sales revenue expenses advertising interest salaries supplies utilities net income 11,000 500 200 750 1,800 100

3,350 7,650

Shoe Metro Statement of Retained Earnings month ended August 31, 2007 RE, May 1 Add: Net Income less dividends RE, May 31 Shoe Metro Balance Sheet August 31, 2007 assets cash accounts receivable notes receivable interest receivable supplies equipment building vans vehicle total 6200 1800 1000 1100 2325 5600 52000 4000 3800 77,825 liabilities accounts payable notes payable salaries payable owner's equity capital stock retained earnings 1250 9000 250 10,500 59,675 7,650 7,650 7,650

total

77,825