Charles Com

Balance Sh
As of Decem
Assets
Current Assets:
Cash
Inventory
Other items

$
$
$

Total current assets:

$ 120,000.00

12,000.00
95,000.00
13,000.00

Non Current Assets:

Total Non current assets:

Total assets

$ 120,000.00

Charles Company
Balance Sheet
As of December 31
Liabilities and Owners' Equity
Current Liabilities:

Total current liabilities:

Non current Liabilities:

Loan from First City Bank

40,000.00

Total non current liabilities:

40,000.00

Owners' equity:
Paid in capital
Total owners' equity:

$
$

80,000.00
80,000.00

Total liabilities and owners' equity:

$ 120,000.00

Data as per the problem:

Current assets
Noncurrent assets
Total assets
Current liabilities
Noncurrent liabilities
Paid-in capital
Retained earnings
Total liabilities and owners' equity

Year 1
$ 113,624.00
$ 410,976.00
$ 524,600.00
$
56,142.00
$ 240,518.00
$ 214,155.00
$
13,785.00
$ 524,600.00

Year 2
$
90,442.00
$ 198,014.00
$ 288,456.00
$
40,220.00
$
78,585.00
$ 173,295.00
$
-3,644.00
$ 288,456.00

Year 3
$
85,124.00
$ 162,011.00
$ 247,135.00
$
15,583.00
$
60,100.00
$ 170,000.00
$
1,452.00
$ 247,135.00

Year 4
$
69,090.00
$ 151,021.00
$ 220,111.00
$
17,539.00
$
30,222.00
###
$
2,350.00
$ 220,111.00

Legend:
Missing values

Basic accounting equation use

where

counting equation used:

Assets = Liabilities + Owners' equity
Assets = Current assets + Noncurrent assets
Liabilities = Current liabilities + Noncurrent liabilitie
Owners' equity = Paid-in capital + Retained earning

Data as per the problem

Sales
Cost of goods sold
Gross margin
Other expenses
Profit before taxes
Tax expense
Net income

Year 1
$ 12,011.00
$ 3,011.00
$ 9,000.00
$ 6,201.00
$ 2,799.00
$ 1,120.00
$ 1,679.00

Year 2
$ 11,968.00
$ 2,992.00
$ 8,976.00
$ 6,429.00
$ 2,547.00
$ 1,019.00
$ 1,528.00

Year 3
$ 11,545.00
$ 2,886.00
$ 8,659.00
$ 6,296.00
$ 2,363.00
$
945.00
$ 1,418.00

Year 4
$ 10,000.00
$ 2,500.00
$ 7,500.00
$ 5,300.00
$ 2,200.00
$
870.00
$ 1,330.00

Legend:
Missing values

Basic accounting equation used:

Gross margin = Sales revenue - Cost o
Revenues - Expenses = Net incom

es revenue - Cost of sales

penses = Net income

Cash
1
2
3
4
5
6
7
8
9
10
11

$
$
$
$
$
$
$
$
$

20,000.00
-5,000.00
-1,000.00
-4,500.00
5,000.00
-1,500.00
1,000.00
-750.00
-500.00

Accounts
Receivable

Supplies
Inventory

Equipment
$

1,000.00

-200.00

7,000.00

5,000.00

$ -1,000.00

(b) Changes in the balance sheet during the month of July:

Acme Consulting
Balance Sheet
As of July 31
Assets
Current Assets:
Cash
Equipment
Supplies inventory
Accounts receivable

$
$
$
$

12,750.00
7,000.00
800.00
4,000.00

Total current assets:

24,550.00

Non Current Assets:

Total Non current assets:

Total assets

24,550.00

(c) Income Statement:

Acme Consulting
Income Statement
For the month of July
Revenues
$ 10,000.00
Cost of Goods sold
$
Gross Margin
$ 10,000.00
Less Operating Expenses
Salaries paid
$ -4,500.00
Rent paid
$
-750.00
Utilities expense $
-500.00
Supplies
$
-200.00
Travel expense
$
-200.00
Net Income
$ 3,850.00

(e)

Cash account includes transactions which involves cash only whereas Income st
effect then revenues and expenses both in cash and credit. In the given problem
equity which is not part of income statement. Also, income statement includes r
recieved in cash.

Accounts
Payable
$
$

2,000.00
$
$

Owners'
Description of
Equity
Transaction
20,000.00 Investment

-4,500.00 Salaries
10,000.00 Revenues

-1,500.00
$
$
200.00 $
$

-750.00 Rent
-500.00 Utilities
-200.00 Travel
-200.00

Acme Consulting
Balance Sheet
As of July 31
Liabilities and Owners' Equity
Current Liabilities:
Accounts Payable

700.00

Total current liabilities:

700.00

Non current Liabilities:

Total non current liabilities:

Owners' equity:
Paid in capital
Total owners' equity:

$
$

23,850.00
23,850.00

Total liabilities and owners'

equity:

24,550.00

(d) Changes in cash account:

Acme Consulting
Cash flow statement
For the month of July
+ Reciepts
Owners' investment
Revenue
Accounts Receivable
Total reciepts
- Payments
Equipment
Supplies
Salaries
Accounts Payable
Rent
Utilities
Total
Closing Cash balance

$
$
$
$

20,000.00
5,000.00
1,000.00
26,000.00

$
$
$
$
$
$
$

5,000.00
1,000.00
4,500.00
1,500.00
750.00
500.00
13,250.00

12,750.00

s cash only whereas Income statement includes transactions which

and credit. In the given problem, the cash account includes owners'
o, income statement includes revenues which have not yet been

(a) Explanation of transaction

Owners invested $20000 in cash to start the business
Equipment costing $7000 of which $5000 was paid in cash
Purchased supplies worth $1000 on cash payment
Paid $4500 employee salaries in cash
Earned revenue of $10000 of which $5000 was paid in cash
Paid $1500 of the $2000 owed to equipment supplier
Received $1000 of the $5000 pending Revenue
The month's rent of $750 was paid in cash
Purchased utilities worth $500 in cash
Travel expense of $200 on credit
Drawing of supplies worth $200 by owners

(a) Analysis of month's transactions:

Accounts
Receivable

Cash
1
2
3
4
5
6
7
8
9
10

Supplies
Inventory

$ 25,000.00
$
-500.00
$
-500.00
$
-750.00
$ -3,000.00
$ 2,000.00
$ -5,000.00

500.00

-100.00

8,000.00

(c) Income statement

Bon Voyage Travel
Income Statement
For the month of June
Revenues
$
10,000.00
Cost of Goods sold
$
Gross Margin
$
10,000.00
Less Operating Expenses
Salaries paid
$
-3,000.00
Rent paid
$
-500.00
Advertising cost $
-750.00
Supplies
$
-100.00
Miscellaneous exp $
-1,000.00
Net Income
$
4,650.00

(e)

Cash account includes transactions which involves cash only whereas Income st
revenues and expenses both in cash and credit. In the given problem, the cash a
income statement.

Equipment

8,000.00

Accounts
Payable

Owners'
Description of Transaction
Equity
### Investment
$
-500.00 Rent

###
office supplies
$
-750.00 Advertising cost
$ -3,000.00 Salaries
$ 10,000.00 Travel commission
###
###
$ 1,000.00 $ -1,000.00 Miscellaneous expenses

(d) Changes in cash account:

Acme Consulting
Cash flow statement
For the month of July
+ Reciepts
Owners' investment
Revenue
Total reciepts
- Payments
Rent
Supplies
Advertising cost
Accounts Payable
Salaries
Total
Closing Cash balance

$
$
$

25,000.00
2,000.00
27,000.00

$
$
$
$
$
$

500.00
500.00
750.00
5,000.00
3,000.00
9,750.00

17,250.00

s cash only whereas Income statement includes transactions which effect then
n the given problem, the cash account includes owners' equity which is not part of

(b) Explanation of transactions

Investment from owners increased the cash account by $20000
Payment of rent in cash reduced owners equity
Equipment purchased on credit increased liabilities
Purchase of supplies on cash payment reduced cash account and increased supplies inventory
Advertising cost of $750 paid in cash reduced owners equity by $750
Salaries paid in cash reduce owners' equity
$2000 of the $10000 travel commission received in cash increases cash account and rest $8000 incre
Outstanding amount cleared reduces cash account
Use of office supplies reduces owners equity
Credit expenses increases accounts payable and reduces owners' equity

a. Assets
Liabilities
Owners' equity =

b. Assets
Owner's equity
Liabilities =
c. Current assets
Liabilities
Owners' equity
Noncurrent assets =
d. Current ratio
Current assets
noncurrent assets
Current liabilities =
Owners' equity =
e. Noncurrent assets
Total assets
Owners' equity

$ 95,000.00
$ 40,000.00
###

$ 65,000.00
$ 40,000.00
###
$ 25,000.00
$ 40,000.00
$ 55,000.00
###
2.2:1
$ 33,000.00
$ 55,000.00

$ 15,000.00 (Since all liabilities are current, Liabili

###
60000
95000
70000

Current Assets =
35000
Current Liabilities = Liabilities =
Current Ratio =
1.4

25000

Equations Used:
Assets = Liabilities + Owners' equity
Liabilities = Current liabilites + Noncurrent liabilities
Assets = current assets + Noncurrent assets
Owners' equity = paid in capital + Retained earnings
Current ratio = Current assets/Current liabilities

bilities are current, Liabilities = $15000)

J.

A
Assets
Current Assets:
Cash
Accounts Recievable
Equipment (at cost)
Inventories
Marketable securities
Investment in the Peerless Company
Total current assets:
Non Current Assets:
Land (at cost)
Buildings(at cost)
Less Accumulated depreciation on buildings
Less Accumulated depreciation on equipment
Total Non current assets:

Total assets

J. L. George Company
Balance Sheet
As of June 30, xxxx
Liabilities and Owners' Equity

$
89,000.00
$
505,000.00
$
761,000.00
$
513,000.00
$
379,000.00
$
320,000.00
$ 2,567,000.00

$
230,000.00
$ 1,120,000.00
$ -538,000.00
$ -386,000.00
$
426,000.00

Current Liabilities:
Accounts Payable
Accrued expenses
Notes payable
Estimated tax

Total current liabilities:

Non current Liabilities:
Bonds Payable

Total non current liabilities:

Owners' equity:
Capital Stock
Retained earnings
Total owners' equity:

$ 2,993,000.00

Total liabilities and owners' equity:

ners' Equity

$
$
$
$

241,000.00
107,000.00
200,000.00
125,000.00

673,000.00

700,000.00

700,000.00

$ 1,000,000.00
$ 620,000.00
$ 1,620,000.00
$ 2,993,000.00

Cash
1
2
3
4
5
6
7
8
9
10

Accounts
Receivable

$ 100,000.00

-15,900.00
$

3,500.00

-3,000.00

7,200.00

Inventory

$
$
$

Owners'
Equity
$ 100,000.00
$ -25,000.00 $
25,000.00
$ -8,500.00
$
-8,500.00

Equipment

Liabilities

15,900.00
9,400.00
-4,500.00

###
$
$

2,700.00

-3,500.00
3,000.00 $
###

-3,000.00

Description of Transaction

Paid in capital increases cash and equal amount of capital stock issued increases owners' equity
Bonds payable refunded with equal amount of stcok reduces liability and increases owners' equity
Depriciation on plant and equipment reduces Equipment value and owners' equity
purchase of equipment on cash payment has no net effect on assets
Purchase of equipment on credit increases assets and liabilities
Sale of equipment on credit with a higher value increases net assets and also increases owners' equit
Reciept of cash for previous credit sales increases assets and reduces liabilities
Dividends declared reduces owners' equity and increases liabilities
Dividends paid reduces assets and liabilities
No net effect of stock split on assets, liabilities or owners' equity

reases owners' equity

ncreases owners' equity

lso increases owners' equity

MARVIN COMPANY
Balance Sheet
As of January 31
Assets
Current Assets:
Cash
$
Inventory
$
Total current assets: $

15,900.00
46,500.00
62,400.00

Non Current Assets:

Land
$
Insurance
$
Total Non current asse$

20,000.00
2,800.00
22,800.00

Total assets

85,200.00

MARVIN COMPANY
Balance Sheet
As of January 31
Liabilities and Owners' Equity
Current Liabilities:
Notes payable
Accounts payable
Total current liabilities:

$
$
$

20,000.00
7,000.00
27,000.00

Non current Liabilities:

Total non current liabilities:

Owners' equity:
Capital
Retained earnings
Total owners' equity:

$
$
$

50,800.00
7,400.00
58,200.00

Total liabilities and owners' equity:

85,200.00