Acc557 Financial Accounting: Week 1 Chapter 1 (E1-4,E1-7,E1-11,P1-2A)

Acc557 Financial Accounting
Week 1 Chapter 1 (E1-4,E1-7,E1-11,P1-2A)

Exercise 1-4
The following situations involve accounting principles and assumptions.
1. Julia Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Julia reports the buildings at fair value in its accounting reports.
2. Dekalb Company includes in its accounting records only transaction data that can be expressed in terms of money.
3. Omar Shariff, president of Omar's Oasis, records his personal living costs as expenses of the Oasis.

For each of the three situations, state 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.

Exercise 1-7
Collins Computer Timeshare Company entered into the following transactions during May 2014.
1. Purchased computer terminals for $20,000 from Digital Equipment on account.
2. Paid $3,000 cash for May rent on storage space.
3. Received $15,000 cash from customers for contracts billed in April.
4. Provided computer services to Schmidt Construction Company for $2,400 cash.
5. Paid Central States Power Co. $11,000 cash for energy usage in May.
6. Stockholders invested an additional $32,000 in the business.
7. Paid Digital Equipment for the terminals purchased in (1) above.
8. Incurred advertising expense for May of $900 on account.

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 stockholders' equity.
(c) An increase in assets and an increase in liabilities.
(d) A decrease in assets and a decrease in stockholders' equity.
(e) A decrease in assets and a decrease in liabilities.
(f) An increase in liabilities and a decrease in stockholders' equity.
(g) An increase in stockholders' equity and a decrease in liabilities.

Exercise 1-11
Two items are omitted from each of the following summaries of balance sheet and income statement data for two corporations for the year 2014, Steven Craig and Georgia Enterprises.
Steven Craig Georgia Enterprises
Beginning of year:
Total assets 108,359 144,106
Total liabilities 94,954 (c)
Total stockholders’ equity (a) 83,783
End of year:
Total assets 178,736 201,078
Total liabilities 134,052 55,855
Total stockholders’ equity 44,684 145,223
Changes during year in stockholders’ equity:
Additional investment (b) 27,928
Dividends 26,810 (d)
Total revenues 240,177 111,710
Total expenses 195,493 61,441
Determine the missing amounts.

Problem 1-2A
On August 31, the balance sheet of Donahue Veterinary Clinic showed Cash $9,000, Accounts Receivable $1,700, Supplies $600, Equipment $6,000, Accounts Payable $3,600, Common Stock $13,000, and Retained Earnings $700. During September, the following transactions occurred.
1. Paid $2,900 cash for accounts payable due.
2. Collected $1,300 of accounts receivable.
3. Purchased additional office equipment for $2,100, paying $800 in cash and the balance on account.
4. Earned revenue of $7,300, of which $2,500 is paid in cash and the balance is due in October.
5. Declared and paid a $400 cash dividend
6. Paid salaries $1,700, rent for September $900, and advertising expense $200.
7. Incurred utilities expense for month on account $170.
8. Received $10,000 from Capital Bank on a 6-month note payable.

(a) Prepare a tabular analysis of the September transactions beginning with August 31 balances. The column headings should be as follows: Cash 1 Accounts Receivable 1 Supplies 1 Equipment 5 Notes Payable 1 Accounts Payable 1 Common Stock 1 Retained Earnings 1 Revenues 2 Expenses 2 Dividends.
(b) Prepare an income statement for September, a retained earnings statement for September, and a balance sheet at September 30.
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