Decision Making Across Organization

Question a

Solution

Ramons would have made a conclusion that the business suffered a loss of 6100 dollars based on

the bank account balance. He used the cash accounting and came to a conclusion that the balance

of the bank had a decrease of 6100 dollars hence the business made a loss of the same margin.

18900-25000= (6100)

Question b

Solution

Balance Sheet at March 31

Liabilities Amount Assets Amount

Advertising
100.00 Cash 18,900.00
expense

Utility expenses 120.00 Caddy Shack 8,000.00

Golf balls and golf

Common Stock 25,000.00 800.00
club

Retained earnings 2,480.00

 Total 27,700.00 27,700.00

Therefore, net income on the 31st of march is considered by Ramons as equivalent to the addition

to the earnings which is 2480 dollars. It is not the right way to establish net income and in 2480

dollars as dividend paid to Anya and Nick for 1000 dollars. The dividend need not tobe

decreased while finding net income.

Question c

Solution

Actual net income=2480+1000

=3480 dollars

Question d

Solution

Revenue recognized = Net Income + Expenses

= 3,480 + (750 + 100+400 +1,000)

= 5,730 dollars
Adventures Travel Journal entries

date item DR CR
1 cash 24000
Common stock 24000
2 cash 7000
Note payable 7000
3 property 11000
cash 11000
4 Operation 1200
expense
Cash 1200
5 Equipment 1450
expense
cash 1450
6 advertising 600
cash 600
7 Acc receivables 16000
cash 2000
revenue 18000
8 capital 400
cash 400
9 Acc payable 2000
cash 2000
10 Acc payable 600
cash 600
11 Acc payable 7000
cash 7000
12 Salaries and 6400
wages
cash 6400
13 cash 12000
Service revenue 12000

Chapter 3
E3-12
On April 1, Adventures
Travel Agency, Inc.
began operations. The
following transactions
were
completed during the
month,
Journalize the
transactions:
DAT
E
TRANSACTION TITLES
DEBIT CREDIT
1 Issued common stock
for
$24,000 cash
Cash 24,000
Common
Stock
24,000
2 Obtained a bank loan
for $7,000
by issuing a note payable
Cash $7,000
Notes
Payable
$7,000
3 Paid $11,000 cash to
buy
equipment
Property,
Plant, and
Equipment
11,000
Cash 11,000
4 Paid $1,200 cash for
April
office rent
Operation
Expense
1,200
Cash 1,200
5 Paid $1,450 for
supplies Equipment
Expense
$1,450
Cash $1,450
6 Purchased $600 of
advertising
in the Daily Herald, on
account
Advertising $600
Accounts
Payable
$600
7 Performed services for
$18,000:
cash of $2,000 was
received
from customers, and the
balance
of $16,000 was billed to
customers on account
Accounts
Receivable
$16,000
Cash $2,000
Service
Revenue
$18,000
8 Paid $400 cashed
dividend to
stockholders
Equity $400
Cash $400
9 Paid the utility bill for
the
month $2,000
Accounts
Payable
$2,000
Cash $2,000
10 Paid Daily Herald the
amount
due in transaction (6)
Accounts
Payable
$600