(10-15 min.) E 1-5

Amounts in Millions

Total Total Total

Assets ! Liabilities = Owners’ equity

Beginning. . . $5,819 ! $2,861 = $2,958

 

Req. 1

Increase during the year. . . 737

_________________________________________

Ending. . . $7,260 ! $3,565 = $3,695

 

Req. 2

Possible reasons for the increase in owners’ equity:

  1. Net income.
  2. Investors made additional investments in the company.

 

(10-20 min.) E 1-7
  1. Increase asset (Cash)

    2. Increase owner’s equity (Capital)

  2. Increase asset (Office Supplies)

    3. Decrease asset (Cash)

  3. Increase asset (Accounts Receivable)

    4. Increase owner’s equity (Service Revenue)

  4. Increase asset (Office Furniture)

    5. Increase liability (Accounts Payable)

  5. Increase asset (Cash)

    6. Decrease asset (Accounts Receivable)

  6. Decrease asset (Cash)

    7. Decrease liability (Accounts Payable)

  7. Increase asset (Cash)

    8. Decrease asset (Land)

  8. Increase asset (Cash)

    9. Increase owner’s equity (Service Revenue)

  9. Decrease asset (Cash)

Decrease owner’s equity (Rent Expense)

 

 

(10-20 min.) E 1-8

Analysis of Transactions
 

ASSETS =

LIABILITIES +

OWNER’S

EQUITY

  

DATE

CASH +

MEDICAL

SUPPLIES +

LAND =

ACCOUNTS

PAYABLE +

LANCE

HUBER,

CAPITAL

TYPE OF

OWNER’S EQUITY

TRANSACTION

May 6

90,000

      

90,000

Owner investment

Bal.

90,000

      

90,000

  

9

(55,000)

  

55,000

  

_______

  

Bal.

35,000

  

55,000

  

90,000

  

12

______

2,000

______

2,000

______

  

Bal.

35,000

2,000

55,000

2,000

90,000

  

15

Not a transaction of the business

      

15-31

7,000

_____

______

______

7,000

Service revenue

Bal.

42,000

2,000

55,000

2,000

97,000

  

15-31

(1,400)

      

(1,400)

Salary expense
 

(1,000)

      

(1,000)

Rent expense
 

(300)

_____

______

______

(300)

Utilities expense

Bal.

39,300

2,000

55,000

2,000

94,300

  

28

500

(500)

______

______

______

  

Bal.

39,800

1,500

55,000

2,000

94,300

  

31

(1,500)

_____

______

(1,500)

______

  

Bal.

38,300

1,500

55,000

500

94,300

  

94,800 94,800

(10-15 min.) E 1-9

Req. 1
  1. Investment by owner
  2. Cash purchase of lease equipment
  3. Purchase of lease equipment on account payable
  4. Lease of equipment on account receivable
  5. Payment of cash expenses
  6. Lease of equipment for cash
  7. Payment of cash on account payable
  8. Collection of cash on account receivable

 

Req. 2

Revenues ($6,600 + $800) $7,400

Less: Expenses 2,000

Net income $5,400

(10-20 min.) E 1-10

Req. 1

TELETAX is a proprietorship, as shown by the account, "M. Dalton, Capital."

 

Req. 2

TELETAX

Balance Sheet

September 30, 20X2

ASSETS

LIABILITIES

Cash

$ 950

Accounts payable

$ 1,750

Accounts receivable

6,900

Note payable

8,000

Supplies

600

Total liabilities

9,750

Office equipment

15,500

OWNER’S EQUITY

  
 

________

M. Dalton, capital

14,200*
 

Total liabilities and

Total assets

$23,950

owner’s equity

$23,950

__________

*

Total assets

!

Total liabilities

=

Capital
 

$23,950

!

$9,750

=

$14,200

The balance sheet reports financial position.

The income statement reports operating results.

(15-25 min.) E 1-11

Req. 1

Venecor Import Service

Income Statement

Year Ended December 31, 20X3

Revenue:

    

Service revenue

  

$161,200

Expenses:

    

Salary expense

$49,000

  

Rent expense

24,000

  

Utilities expense

6,800

  

Supplies expense

4,000

  

Property tax expense

1,200

  

Total expenses

  

85,000

Net income

  

$ 76,200

Results of operations for 20X3: Net income of $76,200

(continued) E 1-11

Req. 2

First we prepare the statement of owner’s equity for the year ended December 31, 20X3, as follows:

Venecor Import Service

Statement of Owner’s Equity

Year Ended December 31, 20X3

Capital, beginning of year

$ -0-

Add: Investment by owner

15,000

Net income for the year (Req. 1)

76,200
 

91,200

Less: Withdrawals by owner

(64,100)

Capital, end of year

$ 27,100

To solve for proprietor’s withdrawals, we put the data in equation form:

$0 + $15,000 + $76,200 ! $X = $27,100

X = $76,200 + $15,000 ! $27,100

X = $64,100

(10-15 min.) E 1-12

(Millions)

19X9 19X8

  1. Revenues $11,170

Expenses 11,302

Net income (net loss) $ (132) $ 490

Net income decreased by $622 million to a net loss of $132 million.

 

(Millions)

2. Total assets ! Total liabilities = Owners’ equity

Year end

19X8 $7,963 ! $3,535 = $4,428

(Decrease)

during (804)

19X9

19X9 $7,899 ! $4,275 = $3,624

 

Performance Poor, because 19X9 was a loss year. As a result,

evaluation

for 19X9: owners’ equity decreased during 19X9.

 

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