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CH2 Exos Finance Accounting

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26 views

CH2 Exos Finance Accounting

Uploaded by

lena
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 6

Ch 2 Exercises

lg
EX 1

Green Company purchased a piece of machinery on credit for


$20,000. Briefly state the way this transaction affects the
company’s basic accounting equation.

EX 2

Foster, Inc., purchased a truck by paying $5,000 and borrowing the


remaining $25,000 required to complete the transaction. Briefly
state how this transaction affects the company’s basic accounting
equation.

EX 3

Amber Company’s assets total $150,000 and its liabilities total


$85,000. What is the amount of Amber’s retained earnings if its
capital stock amounts to $50,000?

EX 4

White Company’s assets total $780,000 and its owners’ equity


consists of capital stock of $500,000 and retained earnings of
$150,000. Does White Company have any outstanding liabilities
and, if so, what is the total amount of its liabilities?

EX 5

Wiley Company had total revenues of $300,000 for a recent


month. During the month the company incurred operating
expenses of $205,000 and purchased land for $45,000. Compute
the amount of Wiley’s net income for the month.

EX 6

Wexler, Inc.’s income statement showed total expenses for the


year to be $50,000. If the company’s revenues for the year were
$125,000 and its year-end cash balance was $35,000, what was
Wexler’s net income for the year?

EX 7
Xavier Company had the following transactions during the current year:

 Had revenues of $100,000 and expenses of $56,000, all in cash.


 Purchased a truck for $25,000.
 Sold land for $10,000.
 Borrowed $15,000 from a local bank.

What was the total change in cash during the year?

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Ch 2 Exercises

EX 8
The night manager of WILLIS Transportation Service, who had no accounting
background, prepared the following balance sheet for the company on
February 28, 2018. The dollar amounts were taken directly from the company’s
accounting records and are correct. However, the balance sheet contains a
number of errors in its headings, format, and the classification of assets,
liabilities, and owners’ equity.

Prepare a corrected balance sheet. Include a proper heading.

EX 9
The balance sheet items of KINER Company as of December 31, 2018, follow in random order.
You are to prepare a balance sheet for the company, using a similar sequence for assets as
illustrated in Exhibit 2-9. You must compute the amount for Retained Earnings.

Page 2 of 6
Ch 2 Exercises

land 90 000 Office Equipment 12 400


accounts payable 43 800 Building 210 000
accounts receivable 56 700 Capital Stock 88 000
cash 36 300 Notes payable 207 000
Retained earnings ?

Page 3 of 6
Ch 2 Exercises

Ex 10
Presented here are the accounts of Hometown Décor Company for the year ended December 31, 2018.
Land $ 13,000 Common Stock $ 28,000
Notes Payable 33,000 Accounts Payable 14,000
Property Tax Expense 2,800 Accounts Receivable 800
Dividends 36,000 Advertising Expense 17,000
Rent Expense 14,000 Building 170,400
Salaries Expense 67,000 Cash 2,800
Salaries Payable 1,300 Equipment 17,000
Service Revenue 225,000 Insurance Expense 1,700
Office Supplies 8,000 Interest Expense 6,800
Retained Earnings, Dec. 31, 2017 56,000

Requirements
1. Prepare Hometown Décor Company’s income statement.

2. Prepare the statement of retained earnings.

3. Prepare the balance sheet.

Ex 11

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Ch 2 Exercises

The bookkeeper of Outdoor Life Landscaping prepared the company’s balance sheet while
the accountant was ill. The balance sheet, shown on the next page, contains numerous errors.
In particular, the bookkeeper knew that the balance sheet should balance, so he plugged in the
retained earnings amount needed to achieve this balance. The retained earnings is incorrect.
All other amounts are correct, but some are out of place or should not be included in this
statement. Prepare a corrected balance sheet.

Ex 12
Pretty Pictures works weddings and prom-type parties. The balance of Retained Earnings was
$20,000 at December 31, 2017. At December 31, 2018, the business’s accounting records
show these balances:
Insurance Expense $ 6,000 Accounts Receivable $ 5,000
Cash 42,000 Notes Payable 10,000
Accounts Payable 13,000 Retained Earnings, Dec. 31, 2018 ?
Advertising Expense 4,500 Salaries Expense 30,000
Service Revenue 115,000 Equipment 85,500
Dividends 13,000 Common Stock 28,000

Prepare the following financial statements for Pretty Pictures for the year ended December 31,
2018:
a. Income statement.
b. Statement of retained earnings.
c. Balance sheet.
Page 5 of 6
Ch 2 Exercises

Page 6 of 6

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