1. Name one industry where revenues and expenses will differ greatly whether we use Cash Accounting or Accrual Accounting? Which do you think is a better representation for that industry cash accounting or accrual accounting?

2. Assets and liabilities are important elements of a company's financial position. a. Define assets. Give three examples of assets other than cash that might appear in the balance sheet of (1) American Airlines and (2) a professional sports team, such as the Boston Celtics. b. Define liabilities. Give three examples of liabilities that might appear in the balance sheet of (1) American Airlines and (2) a professional sports team, such as the Boston Celtics.

3. The night manager of Dixie Transportation Service, who had no accounting background, provide the following balance sheet for the company at February 28, 2011. The dollar amounts were taken directly from the company's accounting records and are correct. However, the balance sheet contains a number of errors in its headings, format, and the classification of assets, liabilities, and owners' equity. DIXIE TRANSPORTATION SERVICE MANAGER'S REPORT 8 P.M. THURSDAY Assets Owners' Equity Capital Stock . . . . . . . . . . . . . . $ 92,000 Accounts Receivable . . . . . . . . $ 70,000 Retained Earnings . . . . . . . . . . 62,000 Notes Payable . . . . . . . . . . . . . 288,000 Cash . . . . . . . . . . . . . . . . . . . . . 69,000 Supplies . . . . . . . . . . . . . . . . . . 14,000 Building . . . . . . . . . . . . . . . . . . 80,000 Land . . . . . . . . . . . . . . . . . . . . . 70,000 Automobiles . . . . . . . . . . . . . . . 165,000 Accounts Payable. . . . . . . . . . . 26,000 $468,000 $468,000 Question: Prepare a corrected balance sheet. Include a proper heading.

4. Compute the missing amounts in the following table: Assets Liabilities Owners' Equity a. $578,000 $342,000 ? b. ? 562,500 $570,000 c. 307,500? 187,200

5. A number of business transactions carried out by Smalling Manufacturing Company are as follows: a. Borrowed money from a bank. b. Sold land for cash at a price equal to its cost. c. Paid a liability. d. Returned for credit some of the office equipment previously purchased on credit but not yet paid for. (Treat this the opposite of a transaction in which you purchased office equipment on credit.) e. Sold land for cash at a price in excess of cost. (Hint: The difference between cost and sales price represents a gain that will be in the company's income statement.) f. Purchased a computer on credit. g. The owner invested cash in the business. h. Purchased office equipment for cash. i. Collected an account receivable. Indicate the effects of each of these transactions on the total amounts of the company's assets, liabilities, and owners' equity. Organize your answer in tabular form, using the following column headings and the code letters I for increase, D for decrease, and NE for no effect. The answer for transaction a is provided as an example: Transaction Assets Liabilities Owners' Equity (a) I I NE

6. During the month of October 2011, Miller Company had the following transactions: 1. Revenues of $10,000 were earned and received in cash. 2. Bank loans of $2,000 were paid off. 3. Equipment of $2,500 was purchased for cash. 4. Expenses of $7,200 were paid. 5. Additional shares of capital stock were sold for $6,000 cash. Assuming that the cash balance at the beginning of the month was $7,450, prepare a statement of cash flows that displays operating, investing, and financing activities and that reconciles the beginning and ending cash balances.

7. Hernandez, Inc., had the following transactions during the month of March 2011. Provide an income statement based on this information, being careful to include only those items that should appear in that financial statement. 1. Cash received from bank loans was $10,000. 2. Revenues earned and received in cash were $9,500. 3. Dividends of $4,000 were paid to stockholders. 4. Expenses incurred and paid were $5,465.

8. McKesson Corporation 's annual report for the year ended March 31, 2009, includes income statements for three years: ending on March 31, 2007, 2008, and 2009. Net income for these three years is as follows (all in millions): $913 (2007), $990 (2008), and $823 (2009). Further analysis of the same income statements reveals that revenues were the following amounts for these same years (all in millions): $92,977 (2007), $101,703 (2008), and $106,632 (2009). State each year's net income as a percentage of revenues and comment briefly on the trend you see over the three year period.