Homework Chapter 1

P1.2
a) Tabular
Date Assets = Liabilities + Equity Total
July 31 Cash 5,000 + AR 1,500 + AP 4,200 Share capital 4,000 + RE 13,000
Supplies 500 + Equipment 4,800
6,000
Augus Analyze: Cash + 1,200 and AR - 1,200
t1 Cash 6,200 + AR 300 + AP 4,200 Share capital 4,000 + RE 13,000
Supplies 500 + Equipment 4,800
6,000
2 Analyze: Cash - 2,800 and AP - 2,800
Cash 3,400 + AR 300 + AP 1,400 Share capital 4,000 + RE 10,200
Supplies 500 + Equipment 4,800
6,000
3 Analyze: Service Revenue +7,500 and cash +4,000 and AR +3,500
Cash 7,400 + AR 3,800 + AP 1,400 Share capital 4,000 + RE 17,700
Supplies 500 + Equipment 4,800 + Service
6,000 Revenue 7,500
4 Analyze: Equipment +2,000 and Cash -400 and AP +1,600
Cash 7,000 + AR 3,800 + AP 3,000 Share capital 4,000 + RE 19,300
Supplies 500 + Equipment 4,800 + Service
8,000 Revenue 7,500
5 Analyze: Cash – 4,100, SW expense +2,800, Rent expense +900, and Advertising
expense +400
Cash 2,900 + AR 3,800 + AP 3,000 Share capital 4,000 + RE 15,200
Supplies 500 + Equipment 4,800 + Service
8,000 Revenue 7,500 – SW
expense 2,800 – Rent
expense 900 –
Advertising expense
400
6 Analyze: Dividends + 700 and Cash -700
Cash 2,200 + AR 3,800 + AP 3,000 Share capital 4,000 + RE 14,500
Supplies 500 + Equipment 4,800 + Service
8,000 Revenue 7,500 – SW
expense 2,800 – Rent
expense 900 –
Advertising expense
400 – Dividends 700
7 Analyze: Note payable +2,000 and Cash +2,000
Cash 4,200 + AR 3,800 + AP 3,000 + Note Share capital 4,000 + RE 16,500
Supplies 500 + Equipment payable 2,000 4,800 + Service
 8,000 Revenue 7,500 – SW
expense 2,800 – Rent
expense 900 –
Advertising expense
400 – Dividends 700
8 Analyze: Utilities expense + 270 and Account payable +270
Cash 4,200 + AR 3,800 + AP 3,270 + Note Share capital 4,000 + RE 16,500
Supplies 500 + Equipment payable 2,000 4,800 + Service
8,000 Revenue 7,500 – SW
expense 2,800 – Rent
expense 900 –
Advertising expense
400 – Dividends 700 –
Utilities expense 270

b) Prepare an income statement for August, a retained earnings statement for August, and a
statement of financial position at August 31.
Income statement
Ai Fang Co
For August, 2020
Monetary unit: ¥ 000
Revenues
Service revenue 7,500
Total revenue 7,500
Less: Expenses
SW expense 2,800
Rent expense 900
Advertising expense 400
Utilities expense 270
Total expenses 4,370
Net income 3,130

Retained earnings statement

Ai Fang Co
For August, 2020
Monetary unit: ¥ 000
Retained earnings, August 1 4,800
Add: Net income 3,130
Less: Dividends 700
Retained earnings, August 31 7,230

Statement of financial position

Ai Fang Co
On August 31, 2020
Monetary unit: ¥ 000
 Assets
Cash 4,200
AR 3,800
Supplies 500
Equipment 8,000
Total assets 16,500
Equity and Liabilities
Equity
Share capital 4,000
Retained earnings 7,230
Total Equity 11,230
Liabilities
AP 3,270
Note payable 2,000
Total liabilities 5,270
Total equity and liabilties 16,500

P1.3
a) Prepare an income statement and a retained earnings statement for the month of May and a
statement of financial position at May 31.

Income statement
Park Flying School Ltd.

for the month of May,2020

Monetary unit: W 000

Revenues

Service revenue 6,800

Total revenues 6,800

Less Expenses

Maintenance and repair exp 400

Rent exp 1,000

Advertising exp 500

Gasoline exp 2,500

Utilities exp 400

 Total expenses 4,800

Net income 2,000

RE statement
Park Flying School Ltd.

for the month of May,2020

Monetary unit: W 000

RE, May 1 0

Add: Net income of May 2,000

Less: Dividends 480

RE, May 31 1,520

Balance sheet
Park Flying School Ltd.

On May 31, 2020

Monetary unit: W 000

Assets

Cash 4,500

Account receivable 7,420

Equipment 64,000

Total assets 75,920

Equity and Liabilities

Equity

Share capital 45,000

Retained earnings 1,520

Total Equity 46,520

Liabilities

Note payable 28,000

 Account payable 1,400

Total liabilties 29,400

Total E and L 75,920

b) Additional information

(1) 900 worth of services were performed and billed but not collected at May 31

Analyze: Account receivable +900 and Service revenue +900

(2) 1,500 of gasoline expense was incurred but not paid

Analyze: Account payable +1,500 and Gasoline expense +1,500

Income statement
Park Flying School Ltd.

for the month of May,2020

Monetary unit: W 000

Revenues

Service revenue (+900) 7,700

Total revenues 7,700

Less Expenses

Maintenance and repair exp 400

Rent exp 1,000

Advertising exp 500

Gasoline exp (+1,500) 4,000

Utilities exp 400

Total expenses 6,300

Net income 1,400

RE statement
Park Flying School Ltd.
 for the month of May,2020

Monetary unit: W 000

RE, May 1 0

Add: Net income of May 1,400

Less: Dividends 480

RE, May 31 920

P1.4
a) Matt Stiner started a delivery service, Stiner Deliveries Ltd., on June 1, 2020. The
following transactions occurred during the month of June.

Date Equation: Assets = Liabilities + Equity Total

1 Analyze: Cash + 10,00 and Share capital +10,000
Record:
Dr Cash 10,000
Cr Share capital 10,000
Cash 10,000 0 Share capital 10,000 10,000
2 Analyze: Equipment 14,000 and Cash -2,000 and Note payable +12,000
Record:
Dr Equipment 14,000
Cr Cash 2,000
Cr Note payaable 12,000
Cash 8,000 + Note payable 12,000 Share capital 10,000 22,000
Equipment 14,000
3 Analyze: Cash – 500 and Rent expense + 500
Record:
Dr Rent expense 500
Cr Cash 500
Cash 7,500 + Note payable 12,000 Share capital 10,000 – 21,500
Equipment 14,000 Rent expense 500
5 Analyze: Service revenue +4,800 and Account receivable +4,800
Record:
Dr Account receivable 4,800
Cr Service Revenue 4,800
Cash 7,500 + Note payable 12,000 Share capital 10,000 – 26,300
Equipment 14,000 + Rent expense 500+
Account receivable Service revenue 4,800
4,800
9 Analyze: Cash -300 and Dividends +300
 Record:
Dr Dividends 300
Cr Cash 300
Cash 7,200 + Note payable 12,000 Share capital 10,000 – 26,000
Equipment 14,000 + Rent expense 500+
Account receivable Service revenue 4,800 –
4,800 Dividends 300
12 Analyze: Supplies +150 and Account payable +150
Record:
Dr Supplies 150
Cr Account payable 150
Cash 7,200 + Note payable 12,000 Share capital 10,000 – 26,150
Equipment 14,000 + + Account payable Rent expense 500+
Account receivable 150 Service revenue 4,800 –
4,800 + Supplies 150 Dividends 300
15 Analyze: Cash + 1,250 and Account receivable -1,250
Record:
Dr Cash 1,250
Cr Account receivable 1,250
Cash 8,450 + Note payable 12,000 Share capital 10,000 – 26,150
Equipment 14,000 + + Account payable Rent expense 500 +
Account receivable 150 Service revenue 4,800 –
3,550 + Supplies 150 Dividends 300
17 Analyze: Gasoline expense +100 and Account payable +100
Record:
Dr Gasoline expense 100
Cr Account payable 100
Cash 8,450 + Note payable 12,000 Share capital 10,000 – 26,150
Equipment 14,000 + + Account payable Rent expense 500+
Account receivable 250 Service revenue 4,800 –
3,550 + Supplies 150 Dividends 300 -
Gasoline expense 100
20 Analyze: Cash +1,500 and Service revenue +1,500
Record:
Dr Cash 1,500
Cr Service Revenue 1,500
Cash 9,950 + Note payable 12,000 Share capital 10,000 – 27,650
Equipment 14,000 + + Account payable Rent expense 500+
Account receivable 250 Service revenue 6,300 –
3,550 + Supplies 150 Dividends 300 -
Gasoline expense 100
23 Analyze: Cash -500 and Note payable -500
Record:
 Dr Note payable 500
Cr Cash 500
Cash 9,450 + Note payable 11,500 Share capital 10,000 – 27,150
Equipment 14,000 + + Account payable Rent expense 500+
Account receivable 250 Service revenue 6,300 –
3,550 + Supplies 150 Dividends 300 -
Gasoline expense 100
26 Analyze: Utilities expense +250 and Cash – 250
Record:
Dr Utilities exp 250
Cr Cash 250
Cash 9,200 + Note payable 11,500 Share capital 10,000 – 26,900
Equipment 14,000 + + Account payable Rent expense 500+
Account receivable 250 Service revenue 6,300 –
3,550 + Supplies 150 Dividends 300 -
Gasoline expense 100 -
Utilities expense 250
29 Analyze: Account payable -100 and Cash -100
Record:
Dr Account payable 100
Cr Cash 100
Cash 9,100 + Note payable 11,500 Share capital 10,000 – 26,800
Equipment 14,000 + + Account payable Rent expense 500+
Account receivable 150 Service revenue 6,300 –
3,550 + Supplies 150 Dividends 300 -
Gasoline expense 100 -
Utilities expense 250
30 Analyze: Salaries and wages expense +1,000 and Cash – 1,000
Record:
Dr Salaries and wages expense 1,000
Cr Cash 1,000
Cash 8,100 + Note payable 11,500 Share capital 10,000 – 25,800
Equipment 14,000 + + Account payable Rent expense 500+
Account receivable 150 Service revenue 6,300 –
3,550 + Supplies 150 Dividends 300 -
Gasoline expense 100 -
Utilities expense 250 -
Salaries and wages
expense 1,000

b. Prepare an income statement for the month of June.

Income statement
Stiner Deliveries Ltd.
 for the month of June, 2020

Monetary unit: £

Revenues

Service revenue 6,300

Total revenues 6,300

Less Expenses

Salaries and wages repair exp 1,000

Rent exp 500

Gasoline exp 100

Utilities exp 250

Total expenses 1,850

Net income 4,450

Note: in case of Net loss = Negative number = (000)

c. Prepare a statement of financial position at June 30, 2020.

Statement of financial position

Stiner Deliveries Ltd.

On June 30, 2020

Monetary unit: £

Assets

Cash 8,100

Account receivable 3,550

Equipment 14,000

Supplies 150

Total assets 25,800

Equity and Liabilities

 Equity

Share capital 10,000

Retained earnings (= 0 + 4,450 - 300) 4,150

Total Equity 14,150

Liabilities

Note payable 11,500

Account payable 150

Total liabilities 11,650

Total E and L 25,800

P1.5
Equity change in year = additional investment – dividend + revenues – expense
Equity at the year beginning + Equity change in year = Equity at the year ending
Equity at the year beginning + additional investment – dividend + revenues – expense = Equity
at the year ending

a. Determine the missing amounts.

Crosby
a = equity = Assets – liabilities = 900,000-650,000=250,000
b = assets = liabilities + equity = 550,000+400,000 = 950,000
c = additional investment = Equity at the year ending + dividend - revenues + expense - Equity
at the year beginning = 400,000 + 100,000 – 3,500,000 + 3,300,000 – 250,000 = 50,000
Stills
d = liabilities = Assets – equity = 1,100,000 – 500,000 = 600,000
e = equity = Assets – liabilities = 1,370,000 – 750,000 = 620,000
f = dividends = Equity at the year beginning + additional investment + revenues – expense -
Equity at the year ending = 500,000 + 150,000 + 4,200,000 - 3,850,000 - 620,000 = 380,000
Nash
g = assets = liabilities + equity = 750,000 + 450,000 = 1,200,000
h = liabilities = Assets – equity = 2,000,000 – 1,300,000 = 700,000
i = Total revenues = Equity at the year ending - Equity at the year beginning - additional
investment + dividend + expense - = 1,300,000 - 450,000 - 100,000 + 140,000 + 3,420,000 =
4,310,000
Young
J = liabilities = Assets – equity = 1,500,000 – 1,000,000 = 500,000
K = assets = liabilities + equity = 800,000 +1,400,000 = 2,200,000
 L = total expenses = Equity at the year beginning + additional investment – dividend + revenues
- Equity at the year ending = 1,000,000 + 150,000 - 100,000 +5,000,000 – 1,400,000 = 4,650,000

b. Prepare the retained earnings statement for Stills Company. Assume beginning
retained earnings was HK$200,000.

Retained earnings statement

Stills Company
For the year ended Dec 31, 2020
Monetary unit: HK$

RE, Jan 1 2020 200,000

Add: Net income of 2020 (=revenues – expenses) 350,000
Less: dividends 380,000
RE, Dec 31 2020 170,000

c. Write a memorandum explaining the sequence for preparing financial statements and the
interrelationship of the retained earnings statement to the income statement and statement
of financial position.
Key point:
The sequence for preparing financial statements is income statement, retained earnings
statement, and statement of financial position.
The interrelationship:
- net income/loss from the income statement is reported in the retained earnings statement
- ending retained earnings reported in the retained earnings statement is the amount
reported for retained earnings on the statement of financial position.