PR

OB
LE
M 1-
4B

(a) RODRIGUEZ CONSULTING

PR
Assets = Liabilities + Owner’s Equity OB
Accounts Office Notes Account M. Rodriguez, M.
LE
s Rodriguez, M 1-
Date Cash + Receivabl +Supplies+ Equipmen =Payable+ + Capital – Drawings +Revenues – Expenses 4C
e t Payable
May  ($  $7,000)
1 7,000)
($ 900)
2    
(900) $600 ($  600)
3
  (125)
5 P
R     $ 4,000 OBLE
9
M (125)
($1,000) 1-4B
12   
(4,000) ($6,400)  6,400
15
(b) RODRIGUEZ CONSULTING (2,500)

Income Statement
 For the Month Ended May 31, 2010

Revenues
Service revenue ($4,000 + $6,400)..... $10,400
Expenses
Salaries expense................................. $2,500
Rent expense....................................... 900
Utilities expense................................. 175
Advertising expense............................ 125
Total expenses.............................. 3,700
Net income............................................. .... $ 6,700

(c) RODRIGUEZ CONSULTING

Balance Sheet
May 31, 2010

Assets
Cash.......................................................................... $14,700
Accounts receivable................................................. 2,400
Supplies................................................................. .... 600
Office equipment...................................................... 3,100
Total assets........................................................ $20,800

Liabilities and Owner’s Equity

Liabilities
Notes payable..................................................... $ 5,000
Accounts payable............................................... 3,100
Total liabilities..................................... ......... 8,100
Owner’s equity
M. Rodriguez, Capital.................................... ...... 12,700*
Total liabilities and owner’s equity.............. $20,800

*($7,000 + $6,700 – $1,000)

 PROBLEM 1-5B

(a) Donatello Raphael Michelangel Leonardo

o
Company Company Company
Company
(a $  (d) $50,00 (g) $129,00 (j) $
) 32,000 0 0 60,000
(b 100,00 (e) 40,00 (h) 110,00 (k) 245,00
) 0 0 0 0
(c 6,000 (f) 33,00 (i) 373,00 (l) 450,00
) 0 0 0

(b) DONATELLO COMPANY

Owner’s Equity Statement
For the Year Ended December 31, 2010

Capital, January 1.................................... $32,000

Add: Investment..................................... $ 6,000
Net income...................................... 17,000 23,000
 55,000
Less: Drawings........................................ 15,000
Capital, December 31............................... $40,000

(c) The sequence of preparing financial statements is income statement, owner’s equity
statement, and balance sheet. The interrelationship of the owner’s equity statement to
the other financial statements results from the fact that net income from the income
statement is reported
in the owner’s equity statement and ending capital reported in the owner’s equity
statement is the amount reported for owner’s equity on the balance sheet.

PROBLEM 2-1A
 J1
Date Account Titles and Explanation Ref. Debit Credit
Apr. 1 Cash............................................. 40,00
0
C. J. Mendez, Capital............. 40,00
0
(Owner’s investment of
cash
in business)

4 Land............................................. 30,00
0
Cash...................................... 30,00
0
(Purchased land for cash)

8 Advertising Expense.................... 1,80

0
Accounts Payable................. 1,800
(Incurred advertising
expense on account)

11 Salaries Expense......................... 1,50

0
Cash...................................... 1,500
(Paid salaries)

12 No entry—Not a transaction.

13 Prepaid Insurance....................... 1,50

0
Cash...................................... 1,500
(Paid for one-year
 insurance policy)

17 C. J. Mendez, Drawing.................. 1,000

Cash...................................... 1,000
(Withdrew cash for
personal
use)

20 Cash............................................. 5,70
0
Admission Revenue............... 5,700
(Received cash for
services
provided)

Date Account Titles and Explanation Ref. Debit Credi

t
Apr. 25 Cash........................................... 2,50
................................................... 0 2,500
Unearned Admission
Revenue......................................
(Received cash for future
services)

30 Cash........................................... 8,90
................................................... 0
8,900
Admission Revenue..............
 (Received cash for
services
provided)

30 Accounts Payable...................... 900

Cash..................................... 900
(Paid creditor on
account)
PROBL
EM 2-
4A

STERLING COMPANY
Trial Balance
 May 31, 2010

Debit Credit
Cash ($5,850 + $520 – $405)............................$ 5,965
Accounts Receivable ($2,570 – $210).............. 2,360
Prepaid Insurance ($700 + $100).................... 800
Supplies ($0 + $520)........................................ 520
Equipment ($8,000 – $520).............................. 7,480
Accounts Payable ($4,500 – $100 + $520 – $210) $ 4,710
Property Taxes Payable................................... 560
M. Sterling, Capital ($11,700 + $1,000)........... 12,700
M. Sterling, Drawing ($0 + $1,000).................. 1,000
Service Revenue.............................................. 6,960
Salaries Expense ($4,200 + $200)................... 4,400
Advertising Expense ($1,100 + $405).............. 1,505
Property Tax Expense ($800 + $100)............... 900
$24,930 $24,930