Accounting Principles 12th Edition by Jerry J. Weygandt Paul D. Kimmel Donald E. Kieso Test Bank

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Accounting Principles 12th Edition by Jerry J. Weygandt Paul D. Kimmel Donald E. Kieso Test Bank

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ACCOUNTING
PRINCIPLES
Jerry J. Weygandt PhD, CPA
University of WisconsinMadison
Madison, Wisconsin
Paul D. Kimmel PhD, CPA
University of WisconsinMilwaukee
Milwaukee, Wisconsin
Donald E. Kieso PhD, CPA
Northern Illinois University
DeKalb, Illinois

1
FEATURE STORY
Accounting in Action

PRACTICE MULTIPLE-CHOICE QUESTIONS
1. Which of the following is not a step in the accounting
process?
(a) Identifi cation. (c) Recording.
(b) Economic entity. (d) Communication.
(LO 1) 2. Which of the following statements about users of
accounting information is incorrect?
(a) Management is an internal user.
(b) Taxing authorities are external users.
(c) Present creditors are external users.
(d) Regulatory authorities are internal users.
3. The historical cost principle states that:
(a) assets should be initially recorded at cost and
adjusted when the fair value changes.
(b) activities of an entity are to be kept separate and
distinct from its owner.
(c) assets should be recorded at their cost.
(d) only transaction data capable of being expressed
in terms of money be included in the accounting
records.
4. Which of the following statements about basic assumptions
is correct?
(a) Basic assumptions are the same as accounting
principles.
(b) The economic entity assumption states that there
should be a particular unit of accountability.
(c) The monetary unit assumption enables accounting
to measure employee morale.
(d) Partnerships are not economic entities.
5. The three types of business entities are:
(a) proprietorships, small businesses, and partnerships.
(b) proprietorships, partnerships, and corporations.
(c) proprietorships, partnerships, and large businesses.
(d) fi nancial, manufacturing, and service companies.
6. Net income will result during a time period when:
(a) assets exceed liabilities.
(b) assets exceed revenues.
(c) expenses exceed revenues.
(d) revenues exceed expenses.
7. As of December 31, 2017, Kent Company has assets of
$3,500 and owners equity of $2,000. What are the liabilities
for Kent Company as of December 31, 2017?
(a) $1,500. (c) $2,500.
(b) $1,000. (d) $2,000.
8. Performing services on account will have the following
effects on the components of the basic accounting
equation:
(a) increase assets and decrease owners equity.
(b) increase assets and increase owners equity.
(c) increase assets and increase liabilities.
(d) increase liabilities and increase owners equity.
9. Which of the following events is not recorded in the
accounting records?
(a) Equipment is purchased on account.
(b) An employee is terminated.
(LO 2)
(LO 2)
(LO 2)
(LO 3)
(LO 3)
(LO 4)
(LO 4)
(c) A cash investment is made into the business.
(d) The owner withdraws cash for personal use.
10. During 2017, Bruske Companys assets decreased
$50,000 and its liabilities decreased $50,000. Its owners
equity therefore:
(a) increased $50,000. (c) decreased $100,000.
(b) decreased $50,000. (d) did not change.
11. Payment of an account payable affects the components
of the accounting equation in the following
way.
(a) Decreases owners equity and decreases liabilities.
(b) Increases assets and decreases liabilities.
(c) Decreases assets and increases owners equity.
(d) Decreases assets and decreases liabilities.
12. Which of the following statements is false?
(a) A statement of cash fl ows summarizes information
about the cash infl ows (receipts) and outfl
ows (payments) for a specifi c period of time.
(b) A balance sheet reports the assets, liabilities, and
owners equity at a specifi c date.
(c) An income statement presents the revenues,
expenses, changes in owners equity, and resulting
net income or net loss for a specifi c period of
time.
(d) An owners equity statement summarizes the
changes in owners equity for a specifi c period of
time.
13. On the last day of the period, Alan Cesska Company
buys a $900 machine on credit. This transaction will
affect the:
(a) income statement only.
(b) balance sheet only.
(c) income statement and owners equity statement
only.
(d) income statement, owners equity statement, and
balance sheet.
14. The fi nancial statement that reports assets, liabilities,
and owners equity is the:
(a) income statement.
(b) owners equity statement.
(c) balance sheet.
(d) statement of cash fl ows.
15. Services performed by a public accountant include:
(a) auditing, taxation, and management consulting.
(b) auditing, budgeting, and management consulting.
(c) auditing, budgeting, and cost accounting.
(d) auditing, budgeting, and management consulting.

PRACTICE EXERCISES
1. Selected transactions for Fabulous Flora Company are listed below.
1. Made cash investment to start business.
2. Purchased equipment on account.
3. Paid salaries.
4. Billed customers for services performed.
5. Received cash from customers billed in (4).
6. Withdrew cash for owners personal use.
7. Incurred advertising expense on account.
8. Purchased additional equipment for cash.
9. Received cash from customers when service was performed.

2. Almas Payroll Services Company entered into the following transactions during May
2017.
1. Purchased computers for $15,000 from Bytes of Data on account.
2. Paid $3,000 cash for May rent on storage space.
3. Received $12,000 cash from customers for contracts billed in April.
4. Performed payroll services for Magic Construction Company for $2,500 cash.
5. Paid Northern Ohio Power Co. $7,000 cash for energy usage in May.
6. Alma invested an additional $25,000 in the business.
7. Paid Bytes of Data for the computers purchased in (1) above.
8. Incurred advertising expense for May of $900 on account.

PRACTICE PROBLEM
Joan Robinson opens her own law offi ce on July 1, 2017. During the fi rst month of operations,
the following transactions occurred.
1. Joan invested $11,000 in cash in the law practice.
2. Paid $800 for July rent on offi ce space.
3. Purchased equipment on account $3,000.
4. Performed legal services to clients for cash $1,500.
5. Borrowed $700 cash from a bank on a note payable.
6. Performed legal services for client on account $2,000.
7. Paid monthly expenses: salaries and wages $500, utilities $300, and advertising $100.
8. Joan withdrew $1,000 cash for personal use.

QUESTIONS
1. Accounting is ingrained in our society and it is vital
to our economic system. Do you agree? Explain.
2. Identify and describe the steps in the accounting
process.
3. (a) Who are internal users of accounting data?
(b) How does accounting provide relevant data to
these users?
4. What uses of fi nancial accounting information are
made by (a) investors and (b) creditors?
5. Bookkeeping and accounting are the same. Do you
agree? Explain.
6. Trenton Travel Agency purchased land for $90,000
cash on December 10, 2017. At December 31, 2017,
the lands value has increased to $93,000. What
amount should be reported for land on Trentons
balance sheet at December 31, 2017? Explain.
7. What is the monetary unit assumption?
8. What is the economic entity assumption?
9. What are the three basic forms of business organizations
for profi t-oriented enterprises?
10. Rachel Hipp is the owner of a successful printing
shop. Recently, her business has been increasing,
and Rachel has been thinking about changing the
organization of her business from a proprietorship
to a corporation. Discuss some of the advantages
Rachel would enjoy if she were to incorporate her
business.
11. What is the basic accounting equation?
12. (a) Defi ne the terms assets, liabilities, and owners
equity.
(b) What items affect owners equity?
13. Which of the following items are liabilities of Siebers
Jewelry Stores?
(a) Cash.
(b) Accounts payable.
(c) Owners drawings.
(d) Accounts receivable.
(e) Supplies.
(f) Equipment.
(g) Salaries and wages payable.
(h) Service revenue.
(i) Rent expense.
14. Can a business enter into a transaction in which only
the left side of the basic accounting equation is
affected? If so, give an example.
15. Are the following events recorded in the accounting
records? Explain your answer in each case.
(a) The owner of the company dies.
(b) Supplies are purchased on account.
(c) An employee is fi red.
(d) The owner of the business withdraws cash from
the business for personal use.
16. Indicate how the following business transactions
affect the basic accounting equation.
(a) Paid cash for janitorial services.
(b) Purchased equipment for cash.
(c) Invested cash in the business.
(d) Paid accounts payable in full.
17. Listed below are some items found in the fi nancial
statements of Tony Gruber Co. Indicate in which
fi nancial statement(s) the following items would
appear.
(a) Service revenue.
(b) Equipment.
(c) Advertising expense.
(d) Accounts receivable.
(e) Owners capital.
(f) Salaries and wages payable.
18. In February 2017, Maria Osgood invested an additional
$10,000 in her business, Osgoods Pharmacy,
which is organized as a proprietorship. Osgoods
accountant, Carl Sota, recorded this receipt as an
increase in cash and revenues. Is this treatment
appropriate? Why or why not?
19. A companys net income appears directly on the
income statement and the owners equity statement,
and it is included indirectly in the companys balance
sheet. Do you agree? Explain.
20. Saylor Enterprises had a capital balance of $168,000
at the beginning of the period. At the end of the
accounting period, the capital balance was $198,000.
(a) Assuming no additional investment or withdrawals
during the period, what is the net income for
the period?
(b) Assuming an additional investment of $13,000
but no withdrawals during the period, what is the
net income for the period?
21. Summarized operations for Bayles Co. for the month
of July are as follows.
Revenues recognized: for cash $20,000; on account
$70,000.
Expenses incurred: for cash $26,000; on account
$40,000.
Indicate for Bayles Co. (a) the total revenues, (b) the
total expenses, and (c) net income for the month of
July.
22. The basic accounting equation is Assets 5 Liabilities 1
Owners equity. Replacing the words in that equation
with dollar amounts, what is Apples accounting equation
at September 24, 2013? (Hint: Owners equity is
equivalent to shareholders equity.)
BRIEF EXERCISES
BE1-1
BE1-1 Presented below is the basic accounting equation. Determine the missing amounts.
Assets 5 Liabilities 1 Owners Equity
(a) $90,000 $50,000 ?
(b) ? $44,000 $70,000
(c) $94,000 ? $53,000
BE1-2 Given the accounting equation, answer each of the following questions.
(a) The liabilities of Weber Company are $120,000 and the owners equity is $232,000.
What is the amount of Weber Companys total assets?
(b) The total assets of Weber Company are $190,000 and its owners equity is $91,000.
What is the amount of its total liabilities?
(c) The total assets of Weber Company are $800,000 and its liabilities are equal to one-half
of its total assets. What is the amount of Weber Companys owners equity?
BE1-3 At the beginning of the year, Gilles Company had total assets of $800,000 and total
liabilities of $300,000. Answer the following questions.
(a) If total assets increased $150,000 during the year and total liabilities decreased
$60,000, what is the amount of owners equity at the end of the year?
(b) During the year, total liabilities increased $100,000 and owners equity decreased
$70,000. What is the amount of total assets at the end of the year?
(c) If total assets decreased $80,000 and owners equity increased $120,000 during the
year, what is the amount of total liabilities at the end of the year?
BE1-4 Use the expanded accounting equation to answer each of the following questions.
(a) The liabilities of Kafka Company are $90,000. Owners capital is $150,000; drawings
are $40,000; revenues, $450,000; and expenses, $320,000. What is the amount of Kafka
Companys total assets?
(b) The total assets of Rivera Company are $57,000. Owners capital is $25,000; drawings
are $7,000; revenues, $52,000; and expenses, $35,000. What is the amount of the companys
total liabilities?
(c) The total assets of Alcorn Co. are $600,000 and its liabilities are equal to two-thirds of
its total assets. What is the amount of Alcorn Co.s owners equity?
BE1-5 Indicate whether each of the following items is an asset (A), liability (L), or part of
owners equity (OE).
________ (a) Accounts receivable ________ (d) Supplies
________ (b) Salaries and wages payable ________ (e) Owners capital
________ (c) Equipment ________ (f) Notes payable
BE1-6 Presented below are three business transactions. On a sheet of paper, list the letters
(a), (b), and (c) with columns for assets, liabilities, and owners equity. For each column,
indicate whether the transactions increased (1), decreased (2), or had no effect (NE) on
assets, liabilities, and owners equity.
(a) Purchased supplies on account.
(b) Received cash for performing a service.
(c) Paid expenses in cash.
BE1-7 Follow the same format as in BE1-6. Determine the effect on assets, liabilities, and
owners equity of the following three transactions.
(a) Invested cash in the business.
(b) Withdrawal of cash by owner.
(c) Received cash from a customer who had previously been billed for services
performed.
BE1-8 Classify each of the following items as owners drawings (D), revenue (R), or
expense (E).
________ (a) Advertising expense ________ (e) Owners drawings
________ (b) Service revenue ________ (f) Rent revenue
________ (c) Insurance expense ________ (g) Utilities expense
________ (d) Salaries and wages expense
BE1-9 Presented below are three transactions. Mark each transaction as affecting owners
investment (I), owners drawings (D), revenue (R), expense (E), or not affecting owners
equity (NOE).
________ (a) Received cash for services performed
________ (b) Paid cash to purchase equipment
________ (c) Paid employee salaries
BE1-10 In alphabetical order below are balance sheet items for Mendoza Company at
December 31, 2017. Kathy Mendoza is the owner of Mendoza Company. Prepare a balance
sheet, following the format of Illustration 1-9.
Accounts payable $90,000
Accounts receivable 72,500
Cash 49,000
Owners capital 31,500
BE1-11 Indicate whether the following items would appear on the income statement (IS),
balance sheet (BS), or owners equity statement (OE).
________ (a) Notes payable ________ (d) Cash
________ (b) Advertising expense ________ (e) Service revenue

DO IT! Exercises

Indicate whether each of the fi ve statements presented below is true or false.
1. The three steps in the accounting process are identifi cation, recording, and examination.
2. The accounting process includes the bookkeeping function.
3. Managerial accounting provides reports to help investors and creditors evaluate a
company.
4. The two most common types of external users are investors and creditors.
5. Internal users include human resources managers.
Indicate whether each of the fi ve statements presented below is true or false.
1. Congress passed the Sarbanes-Oxley Act to ensure that investors invest only in companies
that will be profi table.
2. The standards of conduct by which actions are judged as loyal or disloyal are ethics.
3. The primary accounting standard-setting body in the United States is the Securities
and Exchange Commission (SEC).
4. The historical cost principle dictates that companies record assets at their cost and
continue to report them at their cost over the time the assets are held.
5. The monetary unit assumption requires that companies record only transactions that
can be measured in money.
Classify the following items as investment by owner (I), owners drawings (D),
revenues (R), or expenses (E). Then indicate whether each item increases or decreases
owners equity.
(1) Drawings. (3) Advertising expense.
(2) Rent revenue. (4) Owner puts personal assets into the business.
Transactions made by M. Alberti and Co., a law fi rm, for the month of March are
shown below and on the next page. Prepare a tabular analysis which shows the effects of these
transactions on the expanded accounting equation, similar to that shown in Illustration 1-8.
1. The company performed $20,000 of services for customers, on credit.
2. The company received $20,000 in cash from customers who had been billed for services
(in transaction 1).
3. The company received a bill for $2,300 of advertising but will not pay it until a later
date.
4. M. Alberti withdrew $3,600 cash from the business for personal use.
Presented below is selected information related to Kirby Company at December
31, 2017. Kirby reports fi nancial information monthly.
Accounts Payable $ 3,000 Salaries and Wages Expense $16,500
Cash 6,500 Notes Payable 25,000
Advertising Expense 6,000 Rent Expense 10,500
Service Revenue 53,500 Accounts Receivable 13,500
Equipment 29,000 Owners Drawings 7,500
(a) Determine the total assets of Kirby Company at December 31, 2017.
(b) Determine the net income that Kirby Company reported for December 2017.
(c) Determine the owners equity of Kirby Company at December 31, 2017.

EXERCISES

E1-1 Genesis Company performs the following accounting tasks during the year.
________Analyzing and interpreting information.
________Classifying economic events.
________Explaining uses, meaning, and limitations of data.
________Keeping a systematic chronological diary of events.
________Measuring events in dollars and cents.
________Preparing accounting reports.
________Reporting information in a standard format.
________Selecting economic activities relevant to the company.
________Summarizing economic events.
Accounting is an information system that identifi es, records, and communicates the
economic events of an organization to interested users.
Instructions
Categorize the accounting tasks performed by Genesis as relating to either the identifi cation
(I), recording (R), or communication (C) aspects of accounting.
E1-2 (a) The following are users of fi nancial statements.
________Customers ________Securities and Exchange Commission
________Internal Revenue Service ________Store manager
________Labor unions ________Suppliers
________Marketing manager ________Vice president of fi nance
________Production supervisor
Instructions
Identify the users as being either external users or internal users.
(b) The following questions could be asked by an internal user or an external user.
________Can we afford to give our employees a pay raise?
________Did the company earn a satisfactory income?
________Do we need to borrow in the near future?
________How does the companys profi tability compare to other companies?
________What does it cost us to manufacture each unit produced?
________Which product should we emphasize?
________Will the company be able to pay its short-term debts?
Instructions
Identify each of the questions as being more likely asked by an internal user or an external
user.
E1-3 Angela Duffy, president of Duffy Company, has instructed Jana Barth, the head of
the accounting department for Duffy Company, to report the companys land in the companys
accounting reports at its fair value of $170,000 instead of its cost of $100,000. Duffy
says, Showing the land at $170,000 will make our company look like a better investment
when we try to attract new investors next month.
Instructions
Explain the ethical situation involved for Jana Barth, identifying the stakeholders and the
alternatives.
E1-4 The following situations involve accounting principles and assumptions.
1. Tisinai Company owns buildings that are worth substantially more than they originally
cost. In an effort to provide more relevant information, Tisinai reports the buildings at
fair value in its accounting reports.
2. Kingston Company includes in its accounting records only transaction data that can be
expressed in terms of money.
3. Roger Holloway, owner of Rogers Photography, records his personal living costs as
expenses of the business.
Instructions
For each of the three situations, say if the accounting method used is correct or incorrect.
If correct, identify which principle or assumption supports the method used. If incorrect,
identify which principle or assumption has been violated.
E1-5 Diehl Cleaners has the following balance sheet items.
Accounts payable Accounts receivable
Cash Notes payable
Equipment Salaries and wages payable
Supplies Owners capital
Instructions
Classify each item as an asset, liability, or owners equity.
E1-6 Selected transactions for Green Valley Lawn Care Company are listed below.
1. Made cash investment to start business.
2. Paid monthly rent.
3. Purchased equipment on account.
4. Billed customers for services performed.
5. Withdrew cash for owners personal use.
6. Received cash from customers billed in (4).
7. Incurred advertising expense on account.
8. Purchased additional equipment for cash.
9. Received cash from customers when service was performed.
Instructions
List the numbers of the above transactions and describe the effect of each transaction on
assets, liabilities, and owners equity. For example, the fi rst answer is: (1) Increase in assets
and increase in owners equity.
E1-7 Falske Computer Timeshare Company entered into the following transactions during
May 2017.
1. Purchased computers for $20,000 from Digital Equipment on account.
2. Paid $4,000 cash for May rent on storage space.
3. Received $17,000 cash from customers for contracts billed in April.
4. Performed computer services for Viking Construction Company for $4,000 cash.
5. Paid Tri-State Power Co. $11,000 cash for energy usage in May.
6. Falske invested an additional $29,000 in the business.
7. Paid Digital Equipment for the computers purchased in (1) above.
8. Incurred advertising expense for May of $1,200 on account.
Instructions
Indicate with the appropriate letter whether each of the transactions above results in:
(a) An increase in assets and a decrease in assets.
(b) An increase in assets and an increase in owners equity.
(c) An increase in assets and an increase in liabilities.
(d) A decrease in assets and a decrease in owners equity.
(e) A decrease in assets and a decrease in liabilities.
(f) An increase in liabilities and a decrease in owners equity.
(g) An increase in owners equity and a decrease in liabilities.
E1-8 An analysis of the transactions made by Arthur Cooper & Co., a certifi ed public
accounting fi rm, for the month of August is shown below. The expenses were $650 for rent,
$4,800 for salaries and wages, and $400 for utilities.
E1-9 An analysis of transactions for Arthur Cooper & Co. was presented in E18.
Instructions
Prepare an income statement and an owners equity statement for August and a balance
sheet at August 31, 2017. Assume that August is the companys fi rst month of business.
E1-10 Finch Company had the following assets and liabilities on the dates indicated.
December 31 Total Assets Total Liabilities
2016 $400,000 $250,000
2017 $460,000 $300,000
2018 $590,000 $400,000
Finch began business on January 1, 2016, with an investment of $100,000.
Instructions
From an analysis of the change in owners equity during the year, compute the net income
(or loss) for:
(a) 2016, assuming Finchs drawings were $15,000 for the year.
(b) 2017, assuming Finch made an additional investment of $45,000 and had no drawings
in 2017.
(c) 2018, assuming Finch made an additional investment of $15,000 and had drawings of
$25,000 in 2018.
E1-11 Two items are omitted from each of the following summaries of balance sheet and
income statement data for two proprietorships for the year 2017, Greenes Goods and
Solar Enterprises.
Greenes Solar
Goods Enterprises
Beginning of year:
Total assets $110,000 $129,000
Total liabilities 85,000 (c)
Total owners equity (a) 80,000
End of year:
Total assets 160,000 180,000
Total liabilities 120,000 50,000
Total owners equity 40,000 130,000
Changes during year in owners equity:
Additional investment (b) 25,000
Drawings 37,000 (d)
Total revenues 220,000 100,000
Total expenses 175,000 60,000
Instructions
Determine the missing amounts.
E1-12 The following information relates to Armanda Co. for the year 2017.
Owners capital, January 1, 2017 $48,000 Advertising expense $ 1,800
Owners drawings during 2017 6,000 Rent expense 10,400
Service revenue 63,600 Utilities expense 3,100
Salaries and wages expense 29,500
Instructions
After analyzing the data, prepare an income statement and an owners equity statement for
the year ending December 31, 2017.
E1-13 Abby Roland is the bookkeeper for Cheng Company. Abby has been trying to determine
the correct balance sheet for Cheng Company. Chengs balance sheet is shown below.
Prepare income statement
and owners equity statement.
(LO 5)
Correct an incorrectly
prepared balance sheet.
(LO 5)
Instructions
Prepare a correct balance sheet.
E1-14 Loren Satina is the sole owner of Clear View Park, a public camping ground near
the Lake Mead National Recreation Area. Loren has compiled the following fi nancial
information as of December 31, 2017.
Revenues during 2017camping fees $140,000 Fair value of equipment $140,000
Revenues during 2017general store 65,000 Notes payable 60,000
Accounts payable 11,000 Expenses during 2017 150,000
Cash on hand 23,000 Accounts receivable 17,500
Original cost of equipment 105,500
Instructions
(a) Determine Loren Satinas net income from Clear View Park for 2017.
(b) Prepare a balance sheet for Clear View Park as of December 31, 2017.
E1-15 Presented below is fi nancial information related to the 2017 operations of Sea Legs
Cruise Company.
Maintenance and repairs expense $ 95,000
Utilities expense 13,000
Salaries and wages expense 142,000
Advertising expense 24,500
Ticket revenue 410,000
Instructions
Prepare the 2017 income statement for Sea Legs Cruise Company.
E1-16 Presented below is information related to the sole proprietorship of Alice Henning,
attorney.
Legal service revenue2017 $335,000
Total expenses2017 211,000
Assets, January 1, 2017 96,000
Liabilities, January 1, 2017 62,000
Assets, December 31, 2017 168,000
Liabilities, December 31, 2017 100,000
Drawings2017 ?
Instructions
Prepare the 2017 owners equity statement for Alice Hennings legal practice.

PROBLEMS: SET A
transactions
were completed during the month.
1. Invested $15,000 cash to start the agency.
2. Paid $600 cash for April offi ce rent.
3. Purchased equipment for $3,000 cash.
4. Incurred $700 of advertising costs in the Chicago Tribune, on account.
5. Paid $900 cash for offi ce supplies.
6. Performed services worth $10,000: $3,000 cash is received from customers, and the
balance of $7,000 is billed to customers on account.
7. Withdrew $600 cash for personal use.
8. Paid Chicago Tribune $500 of the amount due in transaction (4).
9. Paid employees salaries $2,500.
10. Received $4,000 in cash from customers who have previously been billed in transaction
(6).
Instructions
(a) Prepare a tabular analysis of the transactions using the following column headings:
Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Owners Capital,
Owners Drawings, Revenues, and Expenses.
(b) From an analysis of the owners equity columns, compute the net income or net loss
for April.
P1-2A Judi Salem opened a law offi ce on July 1, 2017. On July 31, the balance sheet
showed Cash $5,000, Accounts Receivable $1,500, Supplies $500, Equipment $6,000,
Accounts Payable $4,200, and Owners Capital $8,800. During August, the following transactions
occurred.
1. Collected $1,200 of accounts receivable.
2. Paid $2,800 cash on accounts payable.
3. Recognized revenue of $7,500 of which $3,000 is collected in cash and the balance is
due in September.
4. Purchased additional equipment for $2,000, paying $400 in cash and the balance on
account.
5. Paid salaries $2,500, rent for August $900, and advertising expenses $400.
6. Withdrew $700 in cash for personal use.
7. Received $2,000 from Standard Federal Bankmoney borrowed on a note payable.
8. Incurred utility expenses for month on account $270.
Instructions
(a) Prepare a tabular analysis of the August transactions beginning with July 31 balances.
The column headings should be as follows: Cash 1 Accounts Receivable 1 Supplies 1
Equipment 5 Notes Payable 1 Accounts Payable 1 Owners Capital 2 Owners Drawings
1 Revenues 2 Expenses.
(b) Prepare an income statement for August, an owners equity statement for August, and
a balance sheet at August 31.
P1-3A On June 1, Cindy Godfrey started Divine Designs Co., a company that provides
craft opportunities, by investing $12,000 cash in the business. Following are the assets
and liabilities of the company at June 30 and the revenues and expenses for the month of
June.
Cash $10,150 Service Revenue $6,500
Accounts Receivable 2,800 Advertising Expense 500
Supplies 2,000 Rent Expense 1,600
Equipment 10,000 Gasoline Expense 200
Notes Payable 9,000 Utilities Expense 150
Accounts Payable 1,200
Cindy made no additional investment in June but withdrew $1,300 in cash for personal
use during the month.
Instructions
(a) Prepare an income statement and owners equity statement for the month of June and
a balance sheet at June 30, 2017.
(b) Prepare an income statement and owners equity statement for June assuming the
following data are not included above: (1) $900 of services were performed and billed
but not collected at June 30, and (2) $150 of gasoline expense was incurred but not
P1-4A Trixie Maye started her own consulting fi rm, Matrix Consulting, on May 1, 2017.
The following transactions occurred during the month of May.
May 1 Trixie invested $7,000 cash in the business.
2 Paid $900 for offi ce rent for the month.
3 Purchased $600 of supplies on account.
5 Paid $125 to advertise in the County News.
9 Received $4,000 cash for services performed.
12 Withdrew $1,000 cash for personal use.
15 Performed $5,400 of services on account.
17 Paid $2,500 for employee salaries.
20 Paid for the supplies purchased on account on May 3.
23 Received a cash payment of $4,000 for services performed on account on
May 15.
26 Borrowed $5,000 from the bank on a note payable.
29 Purchased equipment for $4,200 on account.
30 Paid $275 for utilities.
Instructions
(a) Show the effects of the previous transactions on the accounting equation using the
following format.
P1-5A Financial statement information about four different companies is as follows.
amounts and prepare owners
equity statement.
(LO 4, 5)
Alpha Beta Psi Omega
Company Company Company Company
January 1, 2017
Assets $ 80,000 $ 90,000 (g) $150,000
Liabilities 41,000 (d) 80,000 (j)
Owners equity (a) 40,000 49,000 90,000
December 31, 2017
Assets (b) 112,000 170,000 (k)
Liabilities 60,000 72,000 (h) 100,000
Owners equity 50,000 (e) 82,000 151,000
Owners equity changes in year
Additional investment (c) 8,000 10,000 15,000
Drawings 15,000 (f) 12,000 10,000
Total revenues 350,000 410,000 (i) 500,000
Total expenses 333,000 385,000 350,000 (l)
Instructions
(a) Determine the missing amounts. (Hint: For example, to solve for (a), Assets 2 Liabilities 5
Owners equity 5 $39,000.)
(b) Prepare the owners equity statement for Alpha Company.
(c) Write a memorandum explaining the sequence for preparing fi nancial statements
and the interrelationship of the owners equity statement to the income statement
and balance sheet.

PROBLEMS: SET B AND SET C
Visit the books companion website, at www.wiley.com/college/weygandt, and choose the
Student Companion site to access Problems: Set B and Set C.

IFRS Exercises
IFRS1-1 Who are the two key international players in the development of international accounting
standards? Explain their role.
IFRS1-2 What is the benefi t of a single set of high-quality accounting standards?
International Financial Reporting Problem: Louis Vuitton
IFRS1-3 The fi nancial statements of Louis Vuitton are presented in Appendix F. Instructions for accessing
and using the companys complete annual report, including the notes to its fi nancial statements, are
also provided in Appendix F.
Instructions
Visit Louis Vuittons corporate website and answer the following questions from the companys 2013
annual report.
(a) What accounting fi rm performed the audit of Louis Vuittons fi nancial statements?
(b) What is the address of the companys corporate headquarters?
(c) What is the companys reporting currency?
Answers to IFRS Self-Test Questions
1. d 2. c 3. A

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