Exercise 1-11 (30 minutes)

a.
b.
Bal.

c.
Bal.

d.
Bal.

e.
Bal.

f.
Bal.

g.
Bal.

h.
Bal.

i.
Bal.

j.
Bal.

Accounts

Equip-

+ Receivable + ment
+$50,000
+ $10,000
1,600
______
48,400 +
+ 10,000
_______
+ 12,000
48,400 +
+ 22,000
+ 2,000
______
50,400 +
+ 22,000
_______ +
$7,000
______
50,400 +
7,000 + 22,000
8,000
______ +
8,000
42,400 +
7,000 + 30,000
2,400
______
______
40,000 +
7,000 + 30,000
+ 5,000 5,000
______
45,000 +
2,000 + 30,000
12,000
______
______
33,000 +
2,000 + 30,000

500
______
______
$32,500 +
$2,000 + $30,000
Cash

Accounts
Payable

=
=
=
=
=
=
=
=
=
=

+$12,000
12,000
_______
12,000
_______
12,000
_______
12,000
_______
12,000
_______
12,000
12,000
0
_______
$
0

L. Gold,

+ Capital
+ $60,000
______
+ 60,000
______
+ 60,000
______
+ 60,000
______
+ 60,000
______
+ 60,000
______
+ 60,000
______
+ 60,000
______
+ 60,000
______
+ $60,000

L. Gold,
Withdrawals

+ Revenues Expenses

+
+
+
+
+
+
+
+
$500
$500 +

$2,000
2,000
7,000
9,000
_____
9,000
_____
9,000
_____
9,000
_____
9,000
_____
$9,000

$1,600
1,600
_____
1,600
_____
1,600
_____
1,600
_____
1,600
2,400
4,000
_____
4,000
_____
4,000
_____
$4,000

Exercise 1-12
a.

Started the business with the owner investing $20,000 cash.

b. Purchased office supplies for $1,500 by paying $1,000 cash and putting the
remaining $500 balance on credit.
c.

Purchased office furniture by paying $8,000 cash.

d. Billed a customer $3,000 for services earned.

e.

Provided services for $500 cash.

Exercise 1-14 (15 minutes)

REAL SOLUTIONS
Income Statement
For Month Ended October 31
Revenues:
Consulting fees earned ....................
Expenses:
Salaries expense ..............................
Rent expense ....................................
Miscellaneous expenses .................
Telephone expense ..........................
Total expenses .................................
Net income ..................................................

$15,000
$6,000
2,550
680
660
9,890
$ 5,110

Problem 1-2A (40 minutes)

Part 1
Company A:
(a)

Equity on December 31, 2010:

Assets .......................................................... $45,000
Liabilities ..................................................... (23,500)
Equity .......................................................... $21,500

(b)

Equity on December 31, 2011:

Equity, December 31, 2010 ........................ $21,500
Plus owner investments ............................
5,000
Plus net income ..........................................
7,500
Less owners withdrawals ......................... (2,500)
Equity, December 31, 2011 ........................ $31,500

(c)

Amount of liabilities on December 31, 2011:

Assets .......................................................... $48,000
Equity .......................................................... (31,500)
Liabilities ..................................................... $16,500

Part 2
Company B:
(a) and (b)
Equity:
12/31/2010
Assets ................................... $35,000
Liabilities .............................. (22,500)
Equity ................................... $12,500
(c)

12/31/2011
$41,000
(27,500)
$13,500

Net income for 2011:

Equity, December 31, 2010 ..................... $12,500
Plus owner investments .........................
1,500
Plus net income .......................................
?
Less owners withdrawals ...................... (3,000)
Equity, December 31, 2011 ..................... $13,500
Therefore, net income must have been $ 2,500.

Part 3
Company C:
First, calculate the beginning balance of equity:
Dec. 31, 2010
Assets .......................................................... $29,000
Liabilities ..................................................... (14,000)
Equity .......................................................... $15,000
Next, find the ending balance of equity by completing this table:
Equity, December 31, 2010 ........................ $15,000
Plus owner investments ............................
7,750
Plus net income ..........................................
9,000
Less owners withdrawals ......................... (3,875)
Equity, December 31, 2011 ........................ $27,875
Finally, find the ending amount of assets by adding the ending balance of equity to the ending balance of
liabilities:
Dec. 31, 2011
Liabilities ..................................................... $19,000
Equity .......................................................... 27,875
Assets .......................................................... $46,875
Part 4
Company D:
First, calculate the beginning and ending owners equity balances:

12/31/2010 12/31/2011
Assets ...................................... $80,000
$ 125,000
Liabilities ................................. (38,000)
(64,000)
Owners Equity ....................... $42,000
$ 61,000
Then, find the amount of owner investments during 2011:
Equity, December 31, 2010 ..........................
Plus owner investments ..............................
Plus net income ............................................
Less owner withdrawals ..............................
Equity, December 31, 2011 ..........................

$42,000
?
12,000
0
$61,000

Thus, owner investments must have been: $ 7,000

Problem 1-2A (Concluded)

Part 5
Company E:
First, compute the balance of equity as of December 31, 2011:
Assets .......................................................... $112,500
Liabilities ..................................................... (75,000)
Equity .......................................................... $ 37,500
Next, find the beginning balance of equity as follows:
Equity, December 31, 2010 ........................ $
?
Plus owner investments ............................
4,500
Plus net income .......................................... 18,000
Less owners withdrawals ......................... (9,000)
Equity, December 31, 2011 ........................ $37,500
Thus, the beginning balance of equity was $24,000.
Finally, find the beginning amount of liabilities by subtracting the beginning
balance of equity from the beginning balance of assets:
Dec. 31, 2010
Assets .......................................................... $123,000
Equity .......................................................... (24,000)
Liabilities ..................................................... $ 99,000