Problems P1-40, P1-43, P1-54 Revised 2-16

Problems Group A

P1-40A Using the accounting equation for transaction analysis Missy Mansion opened a public relations firm called Solid Gold on August 1, 2016. The following amounts summarize her business on August 31, 2016: Cash $7,350

Assets

Liabilities

Equity

cash

Account receivable

Office supplies

land

=

Account payable

Mansion capital

Mansion withdrawals

Service revenue

Rent expense

Advertising Expense

Bal. $2,400 + $2,600 + $0 + $15,000

$3,000 + $ 14,400 $ 2,600

During September 2016, the business completed the following transactions:

Missy Mansion contributed $8,000 cash in exchange for capital.

Missy Mansion contributed $8,000 cash in exchange for capitalPerformed service for a client and received cash of $1,300.Paid off the beginning balance of accounts payable.Purchased office supplies from OfficeMax on account, $400.Collected cash from a customer on account, $2,200.Missy withdrew $1,800.Consulted for a new band and billed the client for services rendered, $6,500.Recorded the following business expenses for the month:

Paid office rent: $1,400.

Paid advertising: $350

Analyze the effects of the transactions on the accounting equation of Solid Gold using the format presented on page 41.

P1-41A Using the accounting equation for transaction analysis

Cameron Turnbull started a new business, Turnbull Gymnastics, and completed the following transactions during December:

Dec. 1 Cameron contributed $21,000 cash in exchange for capital.

2 Received $2,400 cash from customers for services performed.

5 Paid $350 cash for office s upplies.

9 Performed services for a customer and billed the customer for services rendered, $1,500.

10 Received $100 invoice for utilities due in two weeks.

15 Paid for advertising in the local paper, $300.

20 Paid utility invoice received on Dec. 10.

25 Collected cash in full from customer billed on Dec. 9.

28 Paid rent for the month, $2,800.

28 Paid $1,100 to assistant for wages.

30 Received $2,800 cash from customers for services performed.

31 Cameron withdrew $4,500.

P1-42A Preparing financial statements

Presented here are the accounts of Golden City Barbershop for the year ended December 31, 2016.

Land $ 5,000 Owner contribution, 2016 $ 25,000

Notes Payable 37,000 Accounts Payable 17,000

Property Tax Expense 2,700 Accounts Receivable 900

Wilson, Withdrawals 32,000 Advertising Expense 13,000

Rent Expense 11,000 Building 157,000

Salaries Expense 61,000 Cash 3,800

Salaries Payable 900 Equipment 19,000

Service Revenue 195,000 Insurance Expense 2,500

Office Supplies 9,000 Interest Expense 7,000

Wilson, Capital, 12/31/15 49,000

Requirements

1. Prepare Golden City Barbershop?s income statement.

2. Prepare the statement of owner?s equity.

3. Prepare the balance sheet.

P1-43A Preparing financial statements

Click a Pix Photography works weddings and prom-type parties. The balance of Adams, Capital was $26,000 at December 31, 2015. At December 31, 2016, the business?s accounting records show these balances:

Insurance Expense $ 11,000 Accounts Receivable$ 12,000

Cash 40,000 Notes Payable9,000

Accounts Payable 6,000 Adams, Capital, Dec. 31, 2016?

Advertising Expense 3,200 Salaries Expense 20,000

Service Revenue 95,000 Equipment 73,800

Adams, Withdrawals 10,000 Owner contribution 34,000

Prepare the following financial statements for Click a Pix Photography for the year ended December 31, 2016:

a. Income statement.

b. Statement of owner?s equity.

c. Balance sheet

P1-44A Preparing financial statements

The bookkeeper of Lone Star Landscaping prepared the company?s balance sheet while the accountant was ill. The balance sheet contains numerous errors. In particular, the bookkeeper knew that the balance sheet should balance, so he plugged in the owner?s equity amount needed to achieve this balance. The owner?s equity is incorrect. All other amounts are correct, but some are out of place or should not be included in this statement. Prepare a corrected balance sheet.

LONE STAR LANDSCAPING Balance Sheet Month Ended November 30, 2016
Assets	Liabilities
Cash $4,800 Office Supplies 300 Land 33,800 Salary expenses 3,100 Office furniture 6,000 Notes Payable 24,200 Rent Expenses $72,750	Account Receivable $2,100 Tow, Withdrawals 8,000 Service, revenue 44,000 Property tax expense 2,700 Account Payable 2,800 Owner?s Equity Tow Capital 13,150 Total liabilities $27,750

P1-45A Using the accounting equation for transaction analysis and preparing financial statements

Alfonso Sheen recently opened his own accounting firm, which he operates as a sole proprietorship. The name of the new entity is Alfonso Sheen, CPA. Sheen experienced the following events during the organizing phase of the new business and its first month of operations in 2016:

Feb. 5 Sheen deposited $70,000 in a new business bank account titled Alfonso Sheen, CPA. The business gave capital to Sheen.

6 Paid $350 cash for letterhead stationery for new office.

7 Purchased office furniture for the office on account, $7,000.

10 Consulted with tax client and received $1,800 for services rendered.

11 Paid utilities, $400.

12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, $11,000.

18 Paid office rent, $1,000.

25 Received amount due from client that was billed on February 12.

27 Paid full amount of accounts payable created on February 7.

29 Sheen withdrew $4,500.

Requirements

1. Analyze the effects of the events on the accounting equation of Alfonso Sheen, CPA. Use a format similar to Exhibit 1-5.

2. Prepare the following financial statements:

a. Income statement.

b. Statement of owner?s equity.

c. Balance sheet.

P1-46A Using the accounting equation for transaction analysis and preparing financial statements

Angela Petrillo recently opened her own law office, which she operates as a sole proprietorship. The name of the new entity is Angela Petrillo, Attorney. Petrillo experienced the following events during the organizing phase of the new business and its first month of operation, March 2016. Some of the events were personal and did not affect the law practice. Others were business transactions and should be accounted for by the business.

Mar. 1 Sold personal investment in Amazon stock, which she had owned for several years, receiving $31,000 cash.

2 Deposited the $31,000 cash from the sale of the Amazon stock in her personal bank account.

3 Deposited $72,000 cash in a new business bank account titled Angela Petrillo, Attorney. The business gave capital to Petrillo.

5 Paid $350 cash for ink cartridges for the printer.

7 Purchased computers for the law office, agreeing to pay the account, $5,500, within three months.

9 Received $2,500 cash from customers for services rendered.

15 Received bill from The Lawyer for magazine subscription, $340. (Use Miscellaneous Expense account.)

23 Finished court hearings on behalf of a client and submitted a bill for legal services, $18,000, on account.

28 Paid bill from The Lawyer.

30 Paid utilities, $1,300.

31 Received $1,800 cash from clients billed on Mar. 23.

31 Petrillo withdrew cash of $2,000.

Requirements

1. Analyze the effects of the preceding events on the accounting equation of Angela Petrillo, Attorney. Use a format similar to Exhibit 1-5.

2. Prepare the following financial statements:

a. Income statement.

b. Statement of owner?s equity.

c. Balance sheet.

Problem P1-54 is the first problem in a sequence that begins an accounting cycle. The cycle is continued in Chapter 2 and completed in Chapter 5.

P1-54 Using the accounting equation for transaction analysis, preparing financial statements, and calculating return on assets (ROA)

Daniels Consulting began operations and completed the following transactions during December 2016:

Dec. 2

Daniels contributed $20,000 cash in exchange for capital.

2 Paid monthly office rent, $2,000.

3 Paid cash for a computer, $3,600. This equipment is expected to remain in service for five years.

4 Purchased office furniture on account, $3,000. The furniture should last for five years.

5 Purchased office supplies on account, $800.

9 Performed consulting service for a client on account, $2,500.

12 Paid utilities expenses, $150.

18 Performed service for a client and received cash of $2,100.

21 Received $2,400 in advance for client service to be performed in the future. (This increases the Unearned Revenue account, which is a liability. This account will be explained in more detail in Chapter 2.)

21 Hired an administrative assistant to be paid $2,055 on the 20th day of each month. The secretary begins work immediately.

26 Paid $200 on account.

28 Collected $400 on account.

30 Daniels withdrew $1,000.

Requirements

1. Analyze the effects of Daniels Consulting?s transactions on the accounting equation. Use the format of Exhibit 1-5, and include these headings: Cash; Accounts Receivable; Office Supplies; Equipment; Furniture; Accounts Payable; Unearned Revenue; Daniels, Capital; Daniels, Withdrawals; Service Revenue; Rent Expense; and Utilities Expense.

2. Prepare the income statement of Daniels Consulting for the month ended December 31, 2016.

3. Prepare the statement of owner?s equity for the month ended December 31, 2016.

4. Prepare the balance sheet as of December 31, 2016.

5. Calculate the return on assets for Daniels Consulting for December, 2016.>

Assets Cash Bal. $2,400 + + Accounts Receivable = Office Supplies + $2,600 $ + - Land + $15,000 Liabilities Accounts Payable = = $3,000 + + + Equity Mansion, Capital Mansion, Withdrawals - $14,400 $ + - Service Revenue $ - 2,600 Rent Expense $ - - Advertising Expense $ (a) Bal. + + = + + + = + + + = + + (b) Bal. (c) Bal. (d) Bal. + + + = + + + + + = + + + + + = + - + + + + = + - + + + + = + - + (e) Bal. (f) Bal. (g) Bal. (h) Bal. Total Assets $0 - - Total Liabilities & Owner's Equity $0 Remember: After all of the transactions are entered, the total assets should be the same as total liabilites plus owner's equity This is the concept of the Basic Accounting Equation. - CLICK A PIX PHOTOGRAPHY Income Statement Year Ended December 31, 2016 Revenue: Expenses: Total Expenses Net Income Available Accounts: Service Revenue Salaries Expense Insurance Expense Advertising Expense Be careful on your formatting-refer to the summary problem in the textbook CLICK A PIX PHOTOGRAPHY Statement of Owner's Equity Year Ended December 31, 2016 Adams, Capital, December 31, 2015 Owner contribution Net income for the year Owner withdrawals Adams, Capital, December 31, 2016 CLICK A PIX PHOTOGRAPHY Balance Sheet December 31, 2016 Assets Liabilities Total Liabilities Owner's Equity Total Assets Total Liabilities and Owner's Equity Available Accounts for assets, liabilities and equity: Cash Accounts Receivable Equipment Accounts Payable Notes Payable Adams, Capital Pay close attention to what are asset accounts and what are liability and equity accounts Look Closely at the guidance example and the textbook bilities r's Equity Assets Cash + Accounts Receivable + Office Supplies = + Equipment + Furniture Liabilities = Accounts Payable (2) (2) Bal. = (3) Bal. + = (4) Bal. + + = + + + = + + + + = + + + + = + + + + = + + + + = + + + + = + + + + = + + + + = (5) Bal. (9) Bal. (12) Bal. (18) Bal. (21) Bal. (26) Bal. (28) Bal. (30) Bal. Total Assets 0 Remember: After you have entered all of your transactions the total assets shou This is the concept of the Basic Accounting Equation. Liabilities + + Unearned Revenue Equity + Daniels, Capital - Daniels, Withdrawals + Service Revenue - + - + - + + - Rent Expense - + + + + - - + + - - + + + - - + + + - - + + + - - + + + - - - Total Liabilites & Owner's Equity 0 tions the total assets should be the same as total liabilites plus owner's equity Utilities Expense DANIELS CONSULTING Income Statement Month Ended December 31, 2016 Revenue: Expenses: Total Expense Net Income Available accounts revenue and expenses: Service Revenue Rent Expense Utilities Expense DANIELS CONSULTING Statement of Owner's Equity Month Ended December 31, 2016 Daniels, Capital, December 1, 2016 Owner contribution Net income for the month Owner withdrawals Daniels, Capital, December 31, 2016 DANIELS CONSULTING Balance Sheet December 31, 2016 Assets Liabilities Total Liabilities Owner's Equity Total Assets Available Accounts: Cash Accounts Receivable Office Supplies Equipment Furniture Accounts Payable Unearned Revenue Daniels, Capital Total Liabilities and Owner's Equity Liabilities Owner's Equity Calculate the return on assets for Daniels Consulting. Return on assets = Net income Average total assets Average total assets = (Beginning total assets + Ending total assets) 2 Compatibility Report for Problems P1-40, P1-43, P1-54 Revised 2-16.xls Run on 7/11/2016 21:10 If the workbook is saved in an earlier file format or opened in an earlier version of Microsoft Excel, the listed features will not be available. Minor loss of fidelity Some cells or styles in this workbook contain formatting that is not supported by the selected file format. These formats will be converted to the closest format available. # of occurrences 4 Version Excel 97-2003