Question Answer

1 B
2 D
3 D
4 C
5 A
6 D
7 A
8 A
9 C
10 B
M 1-1 Element Answer M 1-2 Item Answer M 1-3
1 B 1 SE
2 D 2 A
3 A 3 R
4 C&D 4 A
5 B 5 E
6 D 6 A
7 A 7 E
8 D 8 L
9 A
Abbreviation Full Designation
CPA Certified Public Accountant
GAAP Generally Accepted Accounting Principles
SEC Securities and Exchange Commission
FASB Financial Accounting Standards Board
E1–1 Term or Abbreviation Definition E1–4
1 J
2 F
3 H
4 E
5 A
6 D
7 I
8 L
9 C
10 K
11 G
12 B
13 M

E1–2 Items Answer

1 A
2 A
3 R

4 L
5 L
6 SE
7 E
8 E
9 E
10 L
11 A
12 A
13 L
14 A
15 E

E1–3 Items Answer

1 L
2 E
3 L
4 L
5 SE
6 A
7 A
8 E
9 E
10 A
11 R
12 A
13 A
14 A
15 A
16 L
17 E
18 A
 Balance Sheet of Honda Motor Corporation as on March 31, 20XX
Assets Amount Liabilities + Owners' Equity
Cash and cash equivalents 1,279 Accounts payable and other current liabilities
Trade accounts, notes, and other receivables 788 Long-term debt
Inventories 900 Other liabilities
Investments 640 A. Total Liabilities
Net property, plant and equipment 1,939
Other assets 6,025 Stockholders’ Equity
Common stock
Retained Earnings
B. Total stockholders’ equity
Total Assets 11,571 Total Liabilities and Stockholders’ Equity (A+B)
 E1-5 1 NEW WORLD BOOK STORE
Amount Balance Sheet
3,568 At December 31
2,043 Assets Amount
1,377 Cash 75,600
6,988 Accounts Receivable 39,000
Store and Offcie Equipment 73,000

259
4,324
4,583
11,571

Total Asset 187,600

2 Net Income for the Year 12,300

OPENING RETAINED EARNINGS 0

(+) NET INCOME FOR THE YEAR ???
(-) DIVIDENDS DECLARED DURING
THE YEAR 0
CLOSING RETAINED EARNINGS 12,300
NEW WORLD BOOK STORE E1-6
Balance Sheet
At December 31
Liabilities + Owners' Equity Amount
Accounts Payable 12,000
Note Payable 3,000
Interest Payable 300
A. Total Liabilities 15,300

Stockholders' Equity
Common Stock 160,000
Retained Earnings 12,300
B. Total Stockholders’ Equity 172,300
Total Liabilities and Stockholders' Equity (A+B) 187,600

FIRST YEAR OF OPERATIONS

AS GIVEN IN THE BALANCE SHEET

 CAMPUS CONNECTION E1-7
Income Statement
For the Month of January
Particulars Amount
Revenue
Cash Sales 150,000
Credit Sales 2,500
A. Total Revenue 152,500
Expenses
Cost of Goods Sold 70,000
Salaries, Rent, Supplies, and Other Expenses 37,000
Utilities 900
B. Total Expenses 107,900
Net Income (A-B) 44,600
 WALGREEN CO. E1-8
Income Statement
For the Year ended August 31
Particulars Amount
Revenue
Net Sales 72,184
Other Income 434
A. Total Revenue 72,618
Expenses
Cost of Sales 51,692
Selling, General and Administration Expense 16,561
Interest Expense 71
B.Total Expenses 68,324
Profit/Earnings before Tax (A-B) 4,294
Provision for Income Tax/Income Tax Expense 1,580
Net Earnings 2,714
 NEIGHBORHOOD REALTY, INCORPORATED E1-9 Independent Cases
Income Statement A
For the Year Ended December 31 B
Particulars Amount C
Revenue D
Commissions earned (150,900+16,800) 167,700 E
Rental service fees 20,000
A. Total Revenue 187,700
Expenses E1-10 Independent Cases
Salaries expense 62,740 A
Commission expense 35,330 B
Payroll tax expense 2,500 C
Rent expense (2,475/11)*12) 2,700 D
Utilities expense 1,600 E
Promotion and advertising expense 7,750
Miscellaneous expenses 500
B.Total Expenses 113,120
Profit/Earnings before Tax (A-B) 74,580
Income Tax Paid 24,400

Net Earnings 50,180

Total Revenues Total Expenses Net Income/Loss Total Assets Total liabilities
93,500 76,940 16,560 140,200 66,500
90,574 75,834 14,740 107,880 30,380
68,120 76,430 -8,310 98,200 69,850
55,804 34,034 21,770 98,980 20,300
84,840 75,320 9,520 105,520 25,520

Total Revenues Total Expenses Net Income/Loss Total Assets Total liabilities
242,300 196,700 45,600 253,500 75,000
206,420 176,500 29,920 590,000 239,400
73,500 91,890 -18,390 260,400 190,760
35,840 26,000 9,840 287,955 190,430
224,130 209,500 14,630 533,950 173,850
Stockholder's Equity E1-11 PAINTER CORPORATION
73,700 Income Statement
77,500 For the Month of January
28,350 Particulars Amount
78,680 Total Revenues 305,000
80,000 Less: Total Expenses 189,000
Pre-Tax Income 116,000
Less: Income Tax 35,000
Stockholder's Equity Net Income 81,000
178,500
350,600 PAINTER CORPORATION
69,640 Balance Sheet
97,525 At January 31
360,100 Assets Amount
Cash 65,150
Receivables from customers 44,700
Merchandise inventory 94,500

Total assets 204,350

 E1-12 CLAY CORPORATION
Income Statement
For the Month of January
Particulars
Total Revenues
Less: Total Expenses
Pre-Tax Income
Less: Income Tax
Net Income

PAINTER CORPORATION CLAY COR

Balance Sheet Balanc
At January 31 At Jan
Liabilities Amount Assets
Payables to suppliers 25,950 Cash
Income taxes payable 35,000 Receivables from customers
Total liabilities 60,950 Merchandise inventory

Stockholders' Equity

Common stock 62,400

Retained earnings 81,000
Total stockholders’ equity 143,400
Total liabilities and stockholders' equity 204,350 Total assets
ORPORATION E1-13
e Statement
onth of January
Amount
299,000
184,000
115,000
34,500
80,500

CLAY CORPORATION
Balance Sheet
At January 31
Amount Liabilities Amount
70,150 Payables to suppliers 26,450
34,500 Income taxes payable 34,500
96,600 Total liabilities 60,950

Stockholders' Equity

Common stock 59,800

Retained earnings 80,500
Total stockholders’ equity 140,300
201,250 Total liabilities and stockholders' equity 201,250
 CLINT’S STONEWORK CORPORATION E1-14 Item Answer
Statement of Stockholders’ Equity 1 I
For the Year Ended on December 31, 2016 2 O
Common Stock Retained Earnings 3 F
Balance at the end of 2015 100,000 16,800 4 O
Add: Net income 2016 42,000 5 O
Less: Dividend -18,700 6 O
Balance at the end of 2016 100,000 40,100 7 I
8 F
Inflow/Outflow
Outflow
Inflow
Outflow
Outflow
Outflow
Outflow
Inflow
Outflow
P1-1 1 HIGHLIGHT CONSTRUCTION COMPANY

Income Statement
For the Year Ended December 31

Particulars Amount
Total sales revenue 128,400
Total expenses 80,200
Pre-Tax Income 48,200
Income Tax (48,200*30%) 14,460
Net Income 33,740

2 HIGHLIGHT CONSTRUCTION COMPANY

Statement of Stockholders’ Equity
For the Year Ended December 31
Common Stock
Balance on January 1 0
Common Stock issued 87,000
Add: Net Income
Less: Dividends declared
Balance on December 31 87000

3 HIGHLIGHT CONSTRUCTION COMPANY

Balance Sheet
At December 31
Assets Amount
Cash 25,600
Receivables from customers 10,800
Inventory of merchandise 81,000
Equipment 42,000

Total assets 159,400

 P1-2

ONSTRUCTION COMPANY
of Stockholders’ Equity
ear Ended December 31
Retained Earnings
0

33,740
-10,000
23740

HT CONSTRUCTION COMPANY
Balance Sheet
At December 31
Liabilities + Owners' Equity Amount
Accounts payable 46,140 1
Salary payable 2,520
Total liabilities 48,660

Stockholders' Equity
Common stock 87,000
Retained earnings 23,740
Total stockholders' equity 110,740
Total liabilities and stockholders' equity 159,400
2
 JAMES COOK LAWN SERVICE

Accounting Equations
Assets
Mowers,
Accounts
Cash/Bank Truck Trimmers
Receivable
& Tools
Cash Borrowed 3,000
Purchase of Truck -1,800 1,800
Purchase of Mowers, Trimmers & Tools -900 900
Balances as on June 1 300 1,800 900 0

Gas, oil, and lubrication -1,050

Pickup repairs -250
Repair of mowers -110
Miscellaneous supplies -80
Helpers -5,400
Payroll taxes -190
Assistance for payroll tax forms -25
Insurance -125
Telephone -110
Note Payable paid off including interest -3,078
Collections from customers 15,000 700

-400 -200
Balances as on August 31 4,882 1,400 700 700
7,682
JAMES COOK LAWN SERVICE
Income Statement
For the Three Months Ended August 31
Particulars Amount
Revenues from Services
Cash/Bank 15,000
Credit 700
Total Revenue 15,700

Expenses
Gas, oil, and lubrication (1050+180) 1,230
Pickup repairs 250
Repair of mowers 110
Miscellaneous supplies 80
Helpers 5,400
Payroll taxes 190
Assistance for payroll tax forms 25
Insurance 125
Telephone 110
Interest 78
Depreciation 600
Total Expenses 8,198
Net Income 7,502

1. A balance sheet will be required to understand the position of the business at the end of August. (Hint: Row 24)
2. A statement of cash flows to understand the sources of cash inflows and outflows. (Hint: Column K)
OK LAWN SERVICE

unting Equations
Liabilities Owners' Equity

Accounts Payable Note Payable Retained Earnings

3,000

0 3,000 0

-1,050 Gas, oil, and lubrication

-250 Pickup repairs
-110 Repair of mowers
-80 Miscellaneous supplies
-5,400 Helpers
-190 Payroll taxes
-25 Assistance for payroll tax forms
-125 Insurance
-110 Telephone
-3,000 -78 Interest expense
15,700 Sales revenue
180 -180 Gas & Oil
-600 Depreciation*
180 0 7,502
7,682

*Depreciation of 600 has been proportionately divided.

(Hint: Row 24)
P1-3 Transaction Income Cash

a 66,000 55,000
b 0 56,000

c 0 -12,500
d -25,000 -12,500
e -2,900 -3,800
f -38,000 -31,500
g 100
g 50,700
 Reason P1-4

All services performed increase income

Cash borrowed is not income

Purchase of truck does not become an expense until it is used (it is an asset)
All wages incured are expenses, 1/2 of the total expense were not paid in cash
Not all of the supplies were used; expense is the amount used
All expenses incurred reduce income
Income
Cash Inflow
1
2

4
The personal residences of the organizers, as these are not resources of the business entity.
It is not indicated whether the amount of service trucks and service equipment are at cost at which they were acquired or at the
should be accounted for.
Company Resources: 1. Cash, inventories, and bills due from customers (i.e., accounts receivable)–these items tend to fluctua
2. The personal residences of the organizers: As above.
3. Service truck and service equipment: As above.
Company Obligations: The bank would like to get an idea about the due dates for these payments as the current cash balance i
Stockholders' equity: 311000-190000-92000 = 29,000
AP1-1 1 INFLUENCE CORPORATION
Income Statement
For the Year Ended December 31
Particulars
Total Revenue
Total Expenses
Pre-Tax Income
Income Tax =31,500*30%
Net Income

2 INFLUENCE CORPORATION
Statement of Stockholders’ Equity
For the Year Ended December 31
Particulars Common Stock
Balance on January 1 0
Common Stock 62,000
Add: Net Income
Less: Dividends declared
Balance on December 31 62,000

3 INFLUENCE CORPORATION
Balance Sheet
At December 31
Asset Amount
Cash 13,150
Accounts Receivable 10,900
Inventory 27,000
Equipment 66,000

Total Assets 117,050

FLUENCE CORPORATION AP1-2
Income Statement
the Year Ended December 31
Amount
100,000
68,500
31,500
9,450
22,050

FLUENCE CORPORATION
ement of Stockholders’ Equity
the Year Ended December 31
Retained Earnings
0

22,050
0
22,050

INFLUENCE CORPORATION
Balance Sheet
At December 31
Liabilities + Owners' Equity Amount
Accounts Payable 31,500 1
Salary Payable 1,500
Total Liabilities 33,000
Stockholders' Equity
Common Stock 62,000
Retained Earnings 22,050
Total Stockholders' Equity 84,050
Total Liabilities & Stockholders' Equity 117,050
2
 LIST ELECTRIC REPAIR COMPANY, INCOR

Assets
Particulars Bank Truck Tools Reveivables
Capital contribution 12,000
Purchase of Panel Truck -9,000 9,000
Purchase of Secondhand Tools -1,500 1,500
Balances as on October 1 1,500 9,000 1,500 0

Paid to Assistant -7,500

Payroll Taxes -175
Supplies purchased -9,500
Oil, Gas, and Maintenance -1,200
Insurance -700
Rent -500
Utilities & Telephone -825
Miscellaneous Expenses -600
Collections from customers 32,000 3,500

-1,029 -171

Balances as on December 31 12,500 7,971 1,329 3,500

25,300
LIST ELECTRIC REPAIR COMPANY, INCORPORATED
Income Statement
For the Three Months Ended December 31
Particulars Amount
Revenue
Service Revenue 35,500

(A) Total Revenue 35,500

Expenses
Salary of assistant 7,500
Payroll Taxes 175
Supplies 9,500
Oil, Gas, and Maintenance 1,200
Insurance 700
Rent 500
Utilities & Telephone 825
Miscellaneous Expenses 600
Unpaid Rent 250
Depreciation 1,200
(B) Total Expenses 22,450
(C) Income Tax Expense 3,930
Net Income (A-B-C) 9,120

1. A balance sheet will be required to understand the position of the business at the end of August. (Hint: Row 24)
2. A statement of cash flows to understand the sources of cash inflows and outflows. (Hint: Column K)
RIC REPAIR COMPANY, INCORPORATED

Liabilities Owners' Equity

Unpaid rent Income Tax Payable Common Stock Retained Earnings
12,000

0 12,000 0

-7,500 Salary of assistant

-175 Payroll Taxes
-9,500 Supplies
-1,200 Oil, Gas, and Maintenance
-700 Insurance
250 -750 Rent
-825 Utilities & Telephone
-600 Miscellaneous Expenses
35,500 Revenues

-1,200 Depreciation*
3,930 -3,930 Income Tax Expense

250 3,930 12,000 9,120

25,300

*Depreciation of 1,200 has been proportionately divided.

August. (Hint: Row 24)
Column K)
AP1-3 Transaction Income (Expense) Cash Received (Paid)
a 85,000 70,000
b 0 25,000
c 0 -8,000
d -36,000 -30,000
e -3,000 -4,000
f -31,000 -15,500
g 15,000
g 37,500
 Reason
All services performed increase income
Cash borrowed is not income
Purchase of truck is not an expense until it is used (it is an asset)
All wages incured are expenses, 1/6th of the total expense were not paid in cash
Not all of the supplies were used; expense is the amount used
All expenses incurred reduce income
Income
Cash Inflow
1
PENNY'S POOL SERVICE & SUPPLY, INCORPORATED
Income Statement
For the Year Ended December 31
Particulars
Revenue
Sales 60,000
(A) Total Revenue

Expenses
Wages 24,000
Cost of supplies used 8,200
Administrative expenses 4,500
(B) Total Expenses
(C) Income Tax Expense
Net Income (A-B-C)

2 PENNY'S POOL SERVICE & SUPPLY, INCORPORATED

Income Statement
For the Year Ended December 31
Common Stock
Common Stock at Beginning 0
Common Stock Issuance 20,000
Net Income
Dividend
Balance at the end 20,000

3 PENNY'S POOL SERVICE & SUPPLY, INCORPORATED

Balance Sheet
At December 31
Asset Amount
Cash 2,900
Accounts Receivable 2,300
Inventory 4,600
Equipment 28,000

Total Assets 37,800

& SUPPLY, INCORPORATED
Statement
ded December 31
Amount

60,000

36,700
4,000
19,300

& SUPPLY, INCORPORATED

Statement
ded December 31
Retained Earnings
0

19,300
-10,000
9,300

ICE & SUPPLY, INCORPORATED

Balance Sheet
t December 31
Liabilities + Owners' Equity Amount
Note Payable 5,000
Accounts Payable 3,500
Total Liabilities 8,500
Stockholders' Equity
Common Stock 20,000
Retained Earnings 9,300
Total Stockholders' Equity 29,300
Total Liabilities & Stockholders' Equity 37,800