Exercise 1-11 (30 minutes)

Cash + Accounts Receivable + Equip-

ment = Accounts Payable + L. Gold,

Capital – L. Gold, Withdrawals + Revenues – Expenses

a. +$50,000 + $10,000 = + $60,000b. – 1,600 ______ ______ – $1,600Bal. 48,400 + + 10,000 = + 60,000 – 1,600c. _______ + 12,000 +$12,000 ______ _____Bal. 48,400 + + 22,000 = 12,000 + 60,000 – 1,600d. + 2,000 ______ _______ ______ + $2,000 _____Bal. 50,400 + + 22,000 = 12,000 + 60,000 + 2,000 – 1,600e. _______ + $7,000 ______ _______ ______ + 7,000 _____Bal. 50,400 + 7,000 + 22,000 = 12,000 + 60,000 + 9,000 – 1,600f. – 8,000 ______ + 8,000 _______ ______ _____ _____Bal. 42,400 + 7,000 + 30,000 = 12,000 + 60,000 + 9,000 – 1,600g. – 2,400 ______ ______ _______ ______ _____ – 2,400Bal. 40,000 + 7,000 + 30,000 = 12,000 + 60,000 + 9,000 – 4,000h. + 5,000 - 5,000 ______ _______ ______ _____ _____Bal. 45,000 + 2,000 + 30,000 = 12,000 + 60,000 + 9,000 – 4,000i. – 12,000 ______ ______ – 12,000 ______ _____ _____Bal. 33,000 + 2,000 + 30,000 = 0 + 60,000 + 9,000 – 4,000j. – 500 ______ ______ _______ ______ – $500 _____ _____Bal. $32,500 + $2,000 + $30,000 = $ 0 + $60,000 – $500 + $9,000 – $4,000

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Exercise 1-12

a. Started the business with the owner investing $20,000 cash. b. Purchased office supplies for $1,500 by paying $1,000 cash and putting the remaining $500 balance on credit.c. Purchased office furniture by paying $8,000 cash.d. Billed a customer $3,000 for services earned.e. Provided services for $500 cash.

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Exercise 1-14 (15 minutes)

REAL SOLUTIONSIncome Statement

For Month Ended October 31Revenues:

Consulting fees earned.................... $15,000Expenses:

Salaries expense.............................. $6,000Rent expense.................................... 2,550Miscellaneous expenses................. 680Telephone expense.......................... 660Total expenses................................. 9,890

Net income.................................................. $ 5,110

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Problem 1-2A (40 minutes)

Part 1

Company A:

(a) Equity on December 31, 2010:

Assets.......................................................... $45,000 Liabilities..................................................... (23,500)Equity.......................................................... $21,500

(b) Equity on December 31, 2011:

Equity, December 31, 2010........................ $21,500 Plus owner investments............................ 5,000 Plus net income.......................................... 7,500 Less owner’s withdrawals......................... (2,500)Equity, December 31, 2011....................... $31,500

(c) Amount of liabilities on December 31, 2011:

Assets.......................................................... $48,000 Equity.......................................................... (31,500)Liabilities..................................................... $16,500

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Part 2

Company B:

(a) and (b)

Equity: 12/31/2010 12/31/2011 Assets................................... $35,000 $41,000 Liabilities.............................. (22,500) (27,500) Equity................................... $12,500 $13,500

(c) Net income for 2011: Equity, December 31, 2010..................... $12,500 Plus owner investments......................... 1,500 Plus net income....................................... ? Less owner’s withdrawals...................... (3,000) Equity, December 31, 2011..................... $13,500

Therefore, net income must have been $ 2,500.

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Part 3Company C:

First, calculate the beginning balance of equity:Dec. 31, 2010

Assets.......................................................... $29,000 Liabilities..................................................... (14,000)Equity.......................................................... $15,000

Next, find the ending balance of equity by completing this table:

Equity, December 31, 2010........................ $15,000 Plus owner investments............................ 7,750 Plus net income.......................................... 9,000 Less owner’s withdrawals......................... (3,875)Equity, December 31, 2011........................ $27,875

Finally, find the ending amount of assets by adding the ending balance of equity to the ending balance of liabilities:

Dec. 31, 2011Liabilities..................................................... $19,000 Equity.......................................................... 27,875Assets.......................................................... $46,875

Part 4Company D:

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First, calculate the beginning and ending owner’s equity balances:12/31/2010 12/31/2011

Assets...................................... $80,000 $ 125,000 Liabilities................................. (38,000) (64,000)Owner’s Equity....................... $42,000 $ 61,000

Then, find the amount of owner investments during 2011:

Equity, December 31, 2010.......................... $42,000 Plus owner investments............................... ?  Plus net income............................................ 12,000Less owner withdrawals.............................. 0Equity, December 31, 2011.......................... $61,000

Thus, owner investments must have been: $ 7,000

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Problem 1-2A (Concluded)

Part 5Company E:

First, compute the balance of equity as of December 31, 2011:

Assets.......................................................... $112,500 Liabilities.................................................... (75,000)Equity.......................................................... $ 37,500

Next, find the beginning balance of equity as follows:

Equity, December 31, 2010........................ $ ?  Plus owner investments............................ 4,500 Plus net income.......................................... 18,000 Less owner’s withdrawals......................... (9,000)Equity, December 31, 2011....................... $37,500

Thus, the beginning balance of equity was $24,000.

Finally, find the beginning amount of liabilities by subtracting the beginning balance of equity from the beginning balance of assets:

Dec. 31, 2010Assets.......................................................... $123,000Equity.......................................................... (24,000 )Liabilities.................................................... $ 99,000

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