Required: Calculate the missing amount in the following
|
Company
|
Assets
|
=
|
Liabilities
|
+
|
Company Stock
|
+
|
Retained Earning
|
|
A
|
$ ?
|
|
25,000
|
|
48,000
|
|
50,000
|
|
B
|
40,000
|
|
?
|
|
7,000
|
|
30,000
|
|
C
|
75,000
|
|
15,000
|
|
?
|
|
42,000
|
|
D
|
125,000
|
|
45,000
|
|
60,000
|
|
?
|
Stockholders Equality
Exercise 1-6A
At the beginning of 2016, Better Corp.'s accounting records had the following general ledger accounts and balances.
BETTER CORP. Accounting Equation
|
Event
|
Assets
|
=
|
Liabilities
|
+
|
Stockholders' Equity
|
|
Acct Titles for RE
|
|
|
Cash Land
|
Land
|
|
Notes Payable
|
|
Common Stock
|
Retained Earnings
|
|
|
Balance 1/1/16
|
10,000
|
20,000
|
|
12,000
|
|
7,000
|
11,0000
|
|
Better Corp. completed the following transactions during 2016
1. Purchased land for $5,000 cash.
2. Acquired $25,000 cash from the issue of common stock.
3. Received $75,000 cash from providing services to customers.
4. Paid cash operating expenses of $42,000.
5. Borrowed $10,000 cash from the bank.
6. Paid a $5,000 cash dividend to the stockholders.
7. Determined that the market value of the land purchased in the event 1 is $35,000.
Required
a. Record the transaction in the appropriate general ledger accounts. Record the amount of the revenue, expense, and dividends, in the Retained Earning column. Provide the appropriate titles for these accounts in the last column of the table.
b. As of December 31,2016, determine the total amount of assets, liabilities, and stockholders' equity and present this information in the form of an accounting equation.
c. What is the amount of the total assets liabilities, and stockholders' equity as of January 1,2017?
Exercise 1-7 A Missing information and recording events
As of December 31,2016, Moss Company had total cash of $195,000, notes payable of $90,500, and common stock of $84,500. During 2017, Moss earned $42,000 of the cash revenue, paid $24,000 for cash expenses, and paid a $3,000 cash dividend to the stockholders.
Required
a. Determine the amount of retained earnings as of December 31,2016.
b. Create an accounting equation and record the beginning account balance under the appropriate elements.
c. Record the revenue, expense, and dividend events under the appropriate elements of the accounting equation created in Requirement b.
d. Prove the equality of the accounting equation as of December 31,2017.
e. Identify the beginning and ending balance on the Cash and Common Stock accounts, explain why the beginning and ending balances in the Cash amounts are different but the beginning and ending balances in the Common Stock account remain the same.
Exercise 1-8A Account titles and the accounting equation
The following account titles were drawn from the general ledger of Holt Food Supplies, Incorporated (HFSI): Computers, Operating Expenses, Rent Revenue, Building, Cash, Notes Payable, Land, Utilities Payable, Utilities Expenses, Trucks, Gasoline, Expenses, Retained Earnings, Supplies, Accounts Payable, Office Furniture, Salaries Expenses, Common Stock, Service Revenue, Interest Expense, Dividends, Supplies Expense.
Required
a. Create an accounting equation using the elements assets, liabilities, and stockholders' equality. List each account title under the element of the accounting equation to which it belongs.
b. Will all businesses have the same number of accounts? Explain your answer.
Exercise 1-9 A Components of the accounting equation
Jones Enterprise was started when it acquired $6,000 cash from creditors and the $10,000 from owners. The company immediately purchased land that cost $12,000.
Required
a. Record the events under an accounting equation.
b. After all events have been recorded, Jones's obligation to creditors represent what percent of total assets?
c. After all events have been recorded Jones's stockholders' equity represents what percent of total assets?
d. Assume the debt is due. Given that Jones has $10,000 in stockholders' equity can the company repay the creditors at this point? Why or why not?
Exercise 1-10A Components of the accounting equation
|
|
Assets
|
=
|
Liabilities
|
+
|
Common Stock
|
+
|
Retained Earnings
|
|
Allen
|
$10,000
|
=
|
$7,500
|
+
|
$2,000
|
+
|
$ 500
|
|
White
|
$12,000
|
=
|
$3,000
|
+
|
$7,200
|
+
|
$ 1,800
|
Required
a. Based on the information alone can you determine whether White can pau a $2,000 cash dividend? Why or why not?
b. Reconstruct the accounting equation for each company using percentage on the right side of the equation instead of the dollar values. Which company is more financially stable? Why?
c. Assume Allen incurs a $3,500 operating loss. The remaining assets are sold for the value shown on the books and the cash proceeds are distributed to the creditors and how much will be paid to investors?
d. Assume White incurs a $3,500 operating loss. The remaining asset are sold for the value shown on the books and the cash proceeds are distributed to the creditors and investors. How much money will be paid to creditors and how much will be paid to investors?
Question 1: What is the accounting equation? Why is this important to the practice of accounting? Please provide an example of how the accounting equation works with recording transactions within a business.
Question 2: Is there a difference between bookkeeping and accounting? Discuss.
Question 3: Accounting reports past performance. How can this be useful when planning future operations?