College accounting 14th edition price solutions manual by haohao112

CHAPTER 2 ANALYZING BUSINE SS TRANSACTIONS Chapt er O pener: Thinki ng Cri t i cal l y T he i ndi vi dual s i n cha r ge of kee pi ng t r ac k of t hes e t r ans ac t i ons a t Southwest as wel l as i n ot her compani es , ar e known as ac count ant s. W hen r ec or di ng t he t r ans ac t i ons, a cc ount ant s a r e r equi r ed t o f ol l ow a s et of r ul es and r egul at i ons known as GAAP. For e ver y f i nanc i al t r ans ac t i on t hat Southwest has , t hei r ac count ant s de t er mi ne t he a cc ount s t hat wer e af f ec t ed a nd t hen t hey r ec or d, r epor t and t hen a nal yze t hes e t r ans ac t i ons. By doi ng so t hey ca n, at a spe ci f i c poi nt i n t i me a nd over a s t i pul at ed pe r i od, be a bl e t o as se ss t he c ompany’ s f i nanc i al per f or manc e i ncl udi ng pr of i t abi l i t y of t he a i r l i ne, a ss et s owned by t he c ompany and of cour se t he a mount owed t o cr edi t or s a nd owner s.

F ast F act s • Southwest Ai r l i nes opene d i n 1971 wi t h t hr ee pl ane s f l yi ng bet wee n Houst on, Dal l as , and San Ant oni o. Southwest Ai r l i nes cur r ent l y f l i es over 100 mi l l i on pas se nger s a yea r t o 97 ci t i es al l ac r oss t he c ount r y. • For t he f i sc al yea r 2012, t he c ompany’ s ne t i ncome was $421 mi l l i on whi l e i t s t ot al oper at i ng r evenue was $17.09 bi l l i on. • In 2012 Southwest se r ved 63.3 mi l l i on ca ns of soda , j ui ce s, a nd wat er ; 14.1 mi l l i on al coholic beverages;37.2millionbagsofpr et zel s; 88.3 mi l l i on bags of pea nut s; 22.9 millionSelect-A- Snacks;and45.5milli on ot her sna cks. Manager i al Im pli cat i ons: Thinki ng Cri t i cal l y Answer s wil l var y. Stude nt s s houl d ment i on t ot al as se t s a nd t he t ype of as se t s, t he l i abi l i t i es t he bus i nes s woul d be r es ponsi bl e f or , and whet her t he bus i nes s i s maki ng a pr of i t . Di sc ussi on Ques t i ons

Not e t o i nst ruc t or: T hes e que st i ons a r e de si gned t o che ck st udent s’ under st andi ng of new te r ms, conc ept s, a nd pr oce dur es pr es ent ed i n t he c hapt er . 1. Ass et s = Lia bi l i t i es + Owner ’ s Equi t y 2. A ssets: property owned. Liabilities: debts. Owners’ equity: owner’s financial interest. 3. A ssets, liabilities, and owner’s equity. 4. Revenue and e xpens es ; net i ncome or l oss 5. Begi nni ng-of -per i od ca pi t al bal anc e, a ddi t i onal i nves t ment s, ne t i ncome/ l oss f or per i od, l es s w i t hdraw al s e ndi ng capit al balance . 6. Fir m name, t i t l e of st at ement , dat e of st at ement or t he pe r i od of t i me c over ed 7. Bal anc e s hee t shows posi t i on at par t i cul ar dat e; i ncr ea se of oper at i ons f or a pe r i od of t i me 8. Inf l ow of m oney/ ass et s r es ult i ng f rom sal es or use of propert y. 9. Out f l ow of money/ as se t s f or cos t s us ed t o pr oduce r evenue .

D iscussion Questions (continued) 10. Subtract total expenses from revenue 11. Increases owner's equity 12. a. as se t s i ncr ea se , owner ’ s e qui t y i ncr ea se b. one a ss et i ncr ea se and a not her dec r ea se ; no cha nge i n t ot

al as se t s c. as se t s de cr ea se , l i abi l i t i es dec r ea se d. as se t s i ncr ea se , owner ’ s e qui t y i ncr ea se e. as se t s de cr ea se , owner ’ s e qui t y dec r ea se f . as se t s de cr ea se , owner ’ s e qui t y dec r ea se E XE R C ISE 2.1 A ssets: $125,900 Liabilities: $26,225 O wners’ Equity $99,675 E XE R C ISE 2.2 1. $22,240 2. $19,020 3. $5,675 4. $36,725 5. $8,875 E XE R C ISE 2.3 Transaction

O wners’ Equity

A ssets = Liabilities +

1. I 2. I I D = D ecrease (+) I/D 3. I/D 4. I 5. D 6. 7. I 8. I/D 9. D 10. D

I I = Increase (-)

I D I D D

E XE R C ISE 2.4 A ssets 1. C ash $13,500 2. D ental Supplies 3,650

Liabilities A ccounts P ayable $23,180

+ O wner’s Equity + D avid Malone, Capital $28,520 +

3. D ental Equipment 26,550 4. O ffice Furniture 8,000 5. Total $51,700

= = =

+ + +

$23,180

$28,520

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EXERCISE 2.5 Assets

Cash + 1. 2.

+$ 6 0 , 0 0 0

+3 , 1 0 0

-4 , 6 0 0

= Liab il it ies + Acco u n Acco u n ts ts Receivab le + Eq u ip men t = P ayab le +

+2 2 , 0 0 0

Own er’s E q u it y Jo h n Amo s Cap it al + Reven u e - Exp en ses +$ 6 0 , 0 0 0 +3 , 1 0 0

+4 , 6 0 0 +5 , 0 5 0

-4 , 4 5 0

+3 , 2 0 0

8. To tals

-1 3 , 0 0 0 $44,250 +

+5 , 0 5 0 4,450

-3 , 2 0 0 $,1,850 +

$26,600 =

-1 3 , 0 0 0 $9,000 +

$60,000 +

$8,150 -$4,450

EXERCISE 2.6 Net i ncome of $23,000 Revenue Repa i r Fees ………………………………… $51,150 Expense s Adver t i si ng Expense ………… $6,300 Sal ar i es Expense …………… 19,100 T el ephone Expense ………… 1,150 Ut i l i t i es Expense …………… 1,600 T ot al Expense s ……………………………… $28,150 Net Income ………………………………… $23,000 EXERCISE 2.7 1. Ser vi ce s wer e pe r f or med f or ca sh. 2. Equipment was pur cha se d f or ca sh. 3. A payment was made on t he a mount owed t o a c r edi t or . 4. An expe nse was pai d i n ca sh. 5. Cas h was r ec ei ved f r om cha r ge c ust omer . 6. Ser vi ce s wer e pe r f or med on c r edi t . 7. An expe nse was pai d i n ca sh.

EXERCISE 2.8 P er ez Inves t m ent Servi ce s Income St at ement Mont h Ended Sept ember 30, 2016 Revenue Fees Income

77 9 0 0 00

Expense s Adver t i si ng Expense Sal ar i es Expense T el ephone Expense

6 5 0 0 00 16 0 0 0 00 8 0 0 00

T ot al Expense s

23 3 0 0 00 54 6 0 0 00

Net Income

EXERCISE 2.9 Net Loss of $1,150 Revenue $5,800

Ser vi ce Revenue ………………………………………….. Expense s

Adver t i si ng Expense …………… $3,100 T el ephone Expense …………… 800 Sal ar i es Expense ……………… 2,600 Cl ea ni ng Expense ……………… 450 T ot al Expense ………………………………………….. $6,950 Net Loss ……………………………………………….. -$1,150 EXERCISE 2.10 P er ez Inves t m ent Servi ce s Sta t ement of Owner ’ s Equi t y Mont h Ended Sept ember 30, 2016 Al exa ndr i a Per ez, Capi t al , Sept ember 1, 2016

26 7 0 0 00

Net Income f or Sept ember Less Wi t hdr awal s f or Sept ember Incr ea se i n Capi t al Al exa ndr i a Per ez, Capi t al , Sept ember 30, 2016

54 6 0 0 00 9 0 0 0 00 45 6 0 0 00 72 3 0 0 00

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EXERCISE 2.10 ( cont i nued) P er ez Inves t m ent Servi ce s Bal anc e Shee t Sept ember 30, 2016 Ass et s

1 0 4 5

0 0 0 0

Lia bi l i t i ese 00 Acc ount s Payabl 00 00 Owner 's Equi t y 00 Al exa ndr i a Per ez, Capi t al

Cas h Acc ount s Rece i vabl e Of f i ce Suppli es Of f i ce Equipment

33 4 3 37

T ot al Ass et s

78 0 0 0 00 T ot al Lia bi l i t i es and Owner 's Equi t y

5 7 0 0 00

72 3 0 0 00 78 0 0 0 00

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PRO BLEM 2 .1 A

Ca sh +

As se ts = Liab ilities + Ow n e r's Eq u ity Ac c o u n ts Ac c o u n ts Ow n e r’s Ca p ita l Re c e iva b le + Su p p lie s + Eq u ip me n t Pa ya b le + =

1 . +$ 9 7 ,0 0 0 +$ 9 7 ,0 0 0 2 . -$ 1 9 ,7 5 0 +$ 1 9 ,7 5 0 3 . +$ 1 4 ,4 0 0 +$ 1 4 ,4 0 0 4 . -$ 1 1 ,8 0 0 -$ 1 1 ,8 0 0 5 . +$ 3 0 ,0 0 0 +$ 3 0 ,0 0 0 6 . +$ 8 ,2 0 0 +$ 8 ,2 0 0 7 . +$ 6 ,3 0 0 +$ 6 ,3 0 0 8 . -$ 4 ,0 0 0 -$ 4 ,0 0 0 9 . +$ 3 ,5 0 0 -$ 3 ,5 0 0 10. -$ 6 ,4 6 0 + $ 6 ,4 6 0 11. -$ 9 ,0 0 0 -$ 9 ,0 0 0 To tals $ 8 7 ,6 9 0 + $ 2 ,8 0 0 + $ 6 ,4 6 0 + $ 3 4 ,1 5 0 = $ 2 ,6 0 0 + $ 1 2 8 ,5 0 0 An a lyze : Th e e n d in g b a lan c e in th e Ca sh a c c o u n t is $ 8 7 ,6 9 0 . PRO BLEM 2 .2 A As se ts Ac c o u n Ca sh + ts + Re c e iva Be gin n in g Ba lan c e s $ 6 1 ,0 0 + b$le1 6 ,6 0 + 0 1. 0 +6 ,6 8 0 Ne w Ba lan c e s 6 1 ,0 0 + 2 3 ,2 8 0 + 2 . 0-1 ,7 0 0 Ne w Ba lan c e s

5 9 ,3 0 + 0 1 ,2 0 3 . +1 0

2 3 ,2 8 0 + -1 1 ,2 0 0

= Liab ilities + Offic e Ac c o u n Au to = ts + Fu rn itu + re Pa ya b le $ 3 5 ,8 0 + $ 2 3 ,5 0 = $ 1 1 ,2 0 + 0 0 0 3 5 ,8 0 0 ,7 0 +1 0 3 7 ,5 0 0

Ow n e r’s Eq u ity M. Dic ke y Ca p ita $ 9 1l ,5 0 0

+ $ 2 3 ,5 0 = 0

1 1 ,2 0 0 +

9 1 ,5 0 0

Re ve n u - Exp e n se s e $ 5 8 ,6 0 - $ 2 4 ,4 0 0 0 +6 ,6 8 0 6 5 ,2 8 0 - 2 4 ,4 0 0

+ $ 2 3 ,5 0 = 0

1 1 ,2 0 0 +

9 1 ,5 0 0

6 5 ,2 8 0 - 2 4 ,4 0 0

+ +

P RO B LEM 2.2A (cont i nued)

New Bal anc es

Ass et s + Of f i ce Cas h + Acc ount s Rec ei vabl Furni t ur e + Aut o = e

= Lia bi l i t i es + Acc ount s Payabl e +

New Bal anc es

New Bal anc es New Bal anc es New Bal anc es New Bal anc es New Bal anc es New Bal anc es ÂŠ 2015 Mc Graw-Hil l E duc at ion. This is propriet ary m at erial s olely f or aut horized ins t ruc t or us e. Not aut horized f 2or disst ale ributorion in any m 7 anner.

Owner â&#x20AC;&#x2122; s Equi t y M. Dic key Capi t al + Revenue - Expense s

70, 500 + 12, 080 + 37, 500 + $23 ,50 0= 11, 200 + 91, 500 + 65, 280 24, 400 4. -880 +880

69,620 + 12,080 + 37,500 + $23,500 = 11,200 + 91,500 + 65,280 - 25,280 5. -4,500 -4,500 65,120 + 12,080 + 37,500 + $23,500 = 6,700 + 91,500 + 65,280 - 25,280 6. -9,700 +9,700 55,420 + 12,080 + 37,500 + $23,500 = 6,700 + 91,500 + 65,280 - 34,980 7. -1,120 +1,120 54,300 + 12,080 + 37,500 + $23,500 = 6,700 + 91,500 + 65,280 - 36,100 8. +10,500 +10,500 64,800 + 12,080 + 37,500 + $23,500 = 6,700 + 91,500 + 75,780 - 36,100 9. -2,350 +2,350 62,450 + 12,080 + 37,500 + $23,500 = 6,700 + 91,500 + 75,780 - 38,450 10. + +12,500 +12,500 $62,450 + $24,580 + $37,500 + $23,500 = $6,700 + $91,500 + $88,280 - $38,450

Anal yze: T ot al as se t s e qual $148,030.

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P RO B LEM 2.3A Br own Equipment Repa i r Ser vi ce Bal anc e Shee t Febr uar y 29, 2016 Ass et s

Cas h Suppli es Acc ount s Rece i vabl e Equipment T ot al Ass et s

34 6 13 78

3 3 2 0

0 8 0 0

0 0 0 0

Lia bi l i t i ese 00 Acc ount s Payabl 00 00 Owner 's Equi t y 00 J ames Br own, Capi t al

131 8 8 0 00 T ot al Lia bi l i t i es and Owner 's Equi t y

24 0 0 0 00

107 8 8 0 00 131 8 8 0 00

Anal yze: Owner 's Equi t y i s $107,880 a t Febr uar y 29, 2016. P RO B LEM 2.4A Cot t on Cl ea ni ng Ser vi ce Income St at ement Mont h Ended Ma y 31, 2016 Revenue Fees Income Expense s Ut i l i t i es Expense Sal ar i es Expense T el ephone Expense

7 8 8 0 00 9 8 0 00 8 9 0 0 00 3 1 4 00

T ot al Expense s Net Loss

10 1 9 4 00 (2 3 1 4 00)

Cot t on Cl ea ni ng Ser vi ce Sta t ement of Owner 's Equi t y Mont h Ended Ma y 31, 2016 ÂŠ 2015 Mc Graw-Hil l E duc at ion. This is propriet ary m at erial s olely f or aut horized ins t ruc t or us e. Not aut horized f 2or disst ale ributorion in any m 8 anner.

T ayl or Cot t on, Capi t al , Ma y 1, 2016 Net Loss f or Ma y (2 3 1 4 00) Less Wi t hdr awal f or Ma y 3 0 0 0 00 Dec r ea se i n Capi t al T ayl or Cot t on, Capi t al , Ma y 31, 2016

50 6 0 0 00

5 3 1 4 00) 45 2 8 6 00

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P RO B LEM 2.4A (cont i nued) Cot t on Cl ea ni ng Ser vi ce Bal anc e Shee t Ma y 31, 2016 Ass et s

Cas h Acc ount s Rece i vabl e Suppli es Equipment T ot al Ass et s

4 5 5 33 50

6 9 8 8 1

8 0 0 0 8

6 0 0 0 6

Lia bi l i t 00 Acc ount s Payabli es e 00 00 Owner 's Equi t y 00 T ayl or Cot t on, Capi t al 00 T ot al Lia bi l i t i es and Owner 's Equi t y

4 9 0 0 00

45 2 8 6 00 50 1 8 6 00

Anal yze: T he a mount of $45,286 ( T ayl or Cot t on, Capi t al ) was t r ans f er r ed t o t he ba l anc e s hee t.

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PRO BLEM 2 .1 B

1. 2. 3. 4. 5.

As se ts Ac c o u n Ca sh + ts + Su p p lie s Re c e iva b +$ 7 2 ,0 le 0-$03 2 ,0 0 0 -$ 6 ,0 0 0 1 2 ,0 +$ 00

= Liab ilities + Ow n e r's Eq u ity Ac c o u n Ow n e r’s + Eq u ip me n = ts + Ca p ita l t Pa ya b le +$ 7 2 ,0 0 0 +$ 3 2 ,0 0 0 1 2 ,0 0 +$ +$ 1 2 ,0 0 0-$0 6 ,0 0 0 +$ 1 2 ,0 0 0

6. 8. 7. 9. 10. 11. To tals

+$ 8 ,4 0 0-$ 5 ,2 0 +$ 7 ,3 0 0 5 ,0 0 0-$ 5 ,0 0 0 +$ 0-$ 6 ,3 0 + $ 6 ,3 0 0 0 -$ 1 0 ,0 0 0$ 3 7 ,9 0 + $ 2 ,3 0 0 + $ 6 ,3 0 0 + $ 4 4 ,0 0 0 = $ 6 ,0 0 0 + 0 An a lyze : Tra n sa c tio n 3 in c re a se d th e Co mp a n y's d e b t b y $ 1 2 ,0 0 0 .

+$ 8 ,4 0 0 -$ 57 ,2 +$ ,3 00 00

-$ 1 0 ,0 0 0 $ 8 4 ,5 0 0

PRO BLEM 2 .2 B

Ca sh Be gin n in g Ba lan c e s 1.

$ 3 8 ,0 0 0

Ne w Ba lan c e s 2.

3 8 ,0 0 0-2 ,8 8 0

Ne w Ba lan c e s 3.

3 5 ,1 2 0 +1 0 ,0 0 0

As se ts Ac c o u n + ts + Re c e iva + b$le1 2 ,0 0 + 0 +8 ,0 0 0 + 2 0 ,0 0 0 +

2 0 ,0 0 0 +

Offic e Fu rn itu re $ 2 4 ,0 0 0

= Liab ilities + Ac c o u n = ts + Pa ya b le = $ 1 0 ,0 0 + 0

Ow n e r’s Eq u ity S. Cra ve n s Ca p ita $ 4 9l ,8 0 0

Su p p lie s

$ 1 2 ,8 0 0

1 2 ,8 0 0

2 4 ,0 0 0

1 0 ,0 0 0

4 9 ,8 0 0

1 2 ,8 0 0

2 4 ,0 0 0

1 0 ,0 0 0

4 9 ,8 0 0

+ +

Re ve n u - Exp e n se s e $ 5 2 ,0 0 - $ 2 5 ,0 0 0 0 +8 ,0 0 0 6 0 ,0 0 0 - 2 5 ,0 0 0 +2 ,8 8 0 6 0 ,0 0 0 - 2 7 ,8 8 0 +1 0 ,0 0 0

P RO B LEM 2.2B ( cont i nued) Ass et s + Acc ount s + Cas h New Bal anc es

Rec ei vabl e

Suppli es +

= Lia bi l i t i es Of f i + Acc ount s ce Furni t ur e = Payabl e +

New Bal anc es

Owner â&#x20AC;&#x2122; s Equi t y S. Cr avens Capi t al + Revenue - Expense s

45, 120 + 20, 000 + 12, 800 + 24, 000 = 10, 000 + 49, 800 + 70, 000 27, 880 4. -1,600 +1,600

43,520 + 20,000 + 12,800 + 24,000 = 10,000 + 49,800 + 70,000 - 29,480 5. -4,800 -4,800 38,720 + 20,000 + 12,800 + 24,000 = 5,200 + 49,800 + 70,000 - 29,480 6. -1,920 +1,920 36,800 + 20,000 + 12,800 + 24,000 = 5,200 + 49,800 + 70,000 - 31,400 7. -14,000 +14,000 22,800 + 20,000 + 12,800 + 24,000 = 5,200 + 49,800 + 70,000 - 45,400 8. +11,200 +11,200 34,000 + 20,000 + 12,800 + 24,000 = 5,200 + 49,800 + 81,200 - 45,400 9. +2,000 +2,000 34,000 + 20,000 + 14,800 + 24,000 = 7,200 + 49,800 + 81,200 - 45,400 10. +6,000 + -6,000 $40,000 + $14,000 + $14,800 + $24,000 = $7,200 + $49,800 + $81,200 - $45,400

Anal yze: Owner 's Equi t y bal anc e i s $85,600; $49,800 + ( $81,200 - $45,400) .

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P RO B LEM 2 . 3 B Smith's T ax Ser vice B alance Shee t Dec emb er 1 , 2 0 16 Assets

Liab ilities

Cash

50 0 0 0 00

Fur nitur e

10 0 0 0 00

E q uip ment

12 0 0 0 00 72 0 0 0 00

T o tal Assets

Owner 's E q uity Do uglas Smith, Cap ital T o tal Liab ilities and Owner 's E q uity

72 0 0 0 00 72 0 0 0 00

Analyze : T he amo unt r ep o r ted o n the b alance shee t fo r o wner â&#x20AC;&#x2122;s eq uity wo uld b e $ 5 6 , 0 0 0 . P RO B LEM 2 . 4 B Kathr yn P r o cto r , Atto r ney and Co unselo r o f Law I nco me Statement Mo nth E nd ed August 3 1 , 2 016 Revenue Fees Income

10 8 0 0 00

E xp enses Utilities Exp ense Salaries Exp ense T elepho ne Exp ense

6 0 0 00 5 4 0 0 00 6 0 0 00

T o tal E xp enses

6 6 0 0 00 4 2 0 0 00

Net I nco me

Kathr yn P r o cto r , Atto r ney and Co unselo r o f Law Statement o f Owner 's E q uity Mo nth E nd ed August 3 1 , 2 016 Kathr yn P r o cto r , Cap ital, Aug. 1 , 2 016

23 2 0 0 00

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Net I nco me fo r August Less W ithd r awals fo r August I ncr ea se in Cap ital Kathr yn P r o cto r , Cap ital, Aug. 3 1 , 2016

4 2 0 0 00 1 2 0 0 00 3 0 0 0 00 26 2 0 0 00

Anal yze: Net Income of $4,200 was t r ans f er r ed f r om t he i ncome s t at ement .

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P RO B LEM 2.4B ( cont i nued) K at hr yn Proc t or , At t or ney and Counsel or at Law Bal anc e Shee t August 31, 2016 Ass et s Cas h Acc ount s Rece i vabl e Suppli es Equipment T ot al Ass et s

4 6 5 10 26

8 6 4 0 8

0 0 0 0 0

00 00 00 00 00

Lia bi l i t Acc ount s Payabli ees Owner 's Equi t y K at hr yn Proc t or , Capi t al T ot al Lia bi l i t i es and Owner 's Equi t y

6 0 0 00

26 2 0 0 00 26 8 0 0 00

Anal yze: Net i ncome of $4,200 was t r ans f er r ed f r om t he i ncome s t at ement .

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CRITICAL TH INKI NG P RO B LEM 2.1 Det er mi ne t he ba l anc e f or Car l Ni chol son, Apri l 30, 2016. Ass et s

Cas h + $30,000 +

Acc ount s Rec ei vabl + Ma chi ner y = e $12,000 + $21,000 =

= Lia bi l i t i + es C. Ni Acc ount s chol son Payabl e + Capi t al $13,200 + ?

Owner ’ s Equi t y

C. Ni chol son - Dr awing + - $6,800 +

Revenue $26,800

Let Car l Ni chol son, Capi t al = X . Solvi ng f or X : $63,000 ( T ot al Ass et s) = $13,200 ( Acc ount s Payabl e) - $6,800 ( Dr awing) + $26,800 ( Revenue ) - $21,490 ( Expense s) + X $63,000 = $11,710 + X $63,000 - $11,710 = $11,710 - $11,710 + X $51,290 = X Car l Ni chol son, Capi t = $51,290 al , Apr i l 1, 2016 Adver t i si ng Expense Ma i nt ena nce Expense Sal ar i es Expense T ot al Expense s

$3,890 4,600 13,000 $21,490

- Expense s - $21,490

CRITICAL TH INKI NG P RO B LEM 2.1 ( cont i nued) Car l N icho lso n, Cer tified P ub lic Acc o untant I nco me Statement Mo nth E nd ed Ap r il 3 0 , 2 016 Revenue Fees Earned

26 8 0 0 00

E xp enses Ad vertising Exp ense Maintenance Exp ense Salaries Exp ense

3 8 9 0 00 4 6 0 0 00 13 0 0 0 00

T o tal E xp enses

21 4 9 0 00 5 3 1 0 00

Net I nco me

Car l N icho lso n, Cer tified P ub lic Acc o untant Statement o f Owner 's E q uity Mo nth E nd ed Ap r il 3 0 , 2 016 Car l N icho lso n, Cap ital, Ap r il 1 , 2 0Net 1 6I nco me fo r Ap r il Less W ithd r awals fo r Ap r il

51 2 9 0 00 5 3 1 0 00 6 8 0 0 00

Dec r ea se in Cap ital Car l N icho lso n, Cap ital, Ap r il 3 0 , 2016

(1 4 9 0 00) 49 8 0 0 00

Car l N icho lso n, Cer tified P ub lic Acc o untant B alance Shee t Ap r il 3 0 , 2 0 16 Assets Cash Acc o unts Rec eivab le

30 0 0 0 00 12 0 0 0 00

Liab ilities Acc o unts P ayab le Owner 's E q uity

13 2 0 0 00

E q uip ment

21 0 0 0 00

Car l N icho lso n, Cap ital

49 8 0 0 00

T o tal Assets

63 0 0 0 00

T o tal Liab ilities and Owner 's E q uity

63 0 0 0 00

Analyze : T he d ec r ea se in o wner 's eq uity was $ 1 , 4 9 0 .

CRITICAL TH INKI NG P RO B LEM 2.2 Body Bui l der s Fi t nes s Cent er Income St at ement T wo Mont hs Ended December 31, 2016 Revenue Fees Ear ned Expense s Rent Expense Cl ea ni ng Expense Adver t i si ng Expense Net Loss

T ot al Expense s

9 7 6 0 00 8 0 0 0 00 2 1 0 0 00 8 0 0 00 10 9 0 0 00 (1 1 4 0 00)

Some s t udent s may i ncl ude t he warm-up sui t s a s a busi nes s e xpens e. If t he s ui t s a r e a t ype of uni f or m, t hei r i ncl usi on i s a ppr opr i at e; i f t hey ar e t o be worn at home a nd at wor k, t hei r cos t i s not a bus i nes s expe nse . T he pa r ki ng t i cket i s a per sona l expe nse . T he c l ea ni ng of t he s t udi o and t he pr i nt i ng of t he f l yer s a r e busi nes s e xpens es . Payment of expe nse s wit h t he ownerâ&#x20AC;&#x2122; s pe r sona l cr edi t ca r d woul d be c onsi der ed a n addi t i onal i nves t ment by t he owner. It i s not unusua l f or new busi nes se s t o oper at e a t a l oss . J ames shoul d pr oj ec t hi s i ncome a nd expe nse s f or t he ne xt se ver al mont hs t o det er mi ne how much ne w busi nes s he wi l l nee d t o ea r n an i ncome. St udent sâ&#x20AC;&#x2122; sugges t i ons f or i mpr ovi ng t he a cc ount i ng syst em mi ght i ncl ude ope ni ng a bus i nes s c hec ki ng ac count , not usi ng a pe r sona l cr edi t ca r d f or busi nes s e xpens es , se t t i ng up a f i l i ng syst em f or busi nes s r ec or ds, a nd pur cha si ng a c omput er t o mai nt ai n f i nanc i al r ec or ds.

SOLUTIO NS TO B USINESS CO NNECTIO NS Manager i al F ocus: 1. Not nec es sa r i l y. Rei nves t ment s i n as se t s or use of ca sh t o pay debt s a f f ec t ca sh. In addi t i on, sa l es or r evenue may have be en " on ac count ." 2. No. Ear l y devel opment i s e xpens i ve, r i sky, and t i me c onsumi ng. Prof i t s may not be a chi eved f or a yea r or mor e. 3. T he f i r m’ s obl i gat i ons must be met as t hey bec ome due . 4. Or gani zed f i nanc i al i nf or mat i on ca n be us ed t o eval uat e ope r at i ng ef f i ci enc y and t o make de ci si ons about cur r ent and f ut ur e a ct i vi t i es . Et hic al Di l em m a: goods a r e s hi pped. If she ent er s t he s al e a nd f or some r ea son t he c ust omer does n’ t make t he or der or t he goods a r e not avai l abl e f or shi pment , Car ol woul d nee d t o pay t he bonus bac k. J ul i a’ s j ob woul d be i n j eopa r dy. F i nanci al Stat em ent Analys i s: 1. Southwest Ai r l i nes Co., Consol i dat ed St at ement of Income, Year s Ended December 31, 2. Pass enger , Fre i ght , Ot her . 3. Sta t ement of Owner ’ s Equi t y ( Consol i dat ed St at ement of Stoc khol der s’ Equit y) . 4. T ot al oper at i ng r evenue was $4.2 bi l l i on f or t he qua r t er ende d Dec ember 31, 2012. 5. See c ur r ent t opi c on websi t e. Int er net Connec t i on: Ma cy’ s, Bloomi ngdal es , and now May i s i ncl uded i n t he Fede r at ed Corpor at i on. Shopping onl i ne is oneveryhomepage.Torecordanonlinesalei t must debi t a c r edi t ca r d r ec ei vabl e a nd cr edi t sales. Ageneraljobannouncementandrequir ement s a r e gi ven a t t he s i t e. Team Work: Acc ount s Payabl e Cle r k woul d use Purc has es ( Incr ea se ) , A/ P (i ncr ea se and de cr ea se ) and Cash ( dec r ea se ) . Acc ount s Rece i vabl e Cle r k woul d use Sal es ( i ncr ea se ) , A/ R ( i ncr ea se and de cr ea se ) and Cas h ( i ncr ea se ) . Full cha r ge bookkee per woul d use ac count s Cash ( i ncr ea se and de cr ea se ) , Bank Char ges ( i ncr ea se ) and M i sc el l ane ous a cc ount ( i ncr ea se ) , Int er es t Income ( i ncr ea se ) , Int er es t Expense ( i ncr ea se ) . Acc ur at e number s a r e de vel oped when i t i s de t er mi ned t hat al l t r ans ac t i ons have be en e nt er ed a nd t hat t ot al as se t s e qual t ot al l i abi l i t i es pl us owner ’ s e qui t y.

SOLUTIONS TO PRACTICE TEST P art A True- F al se 1. T RUE 2.

T RUE

FALSE

T RUE

FALSE

T RUE

FALSE

T RUE

9. 10.

FALSE T RUE

P art B Mat chi ng 1. b 2. f 3. e 4. c 5. h 6. d 7. g 8. a P art C Com ple t i on 1. pr of i t 2. cr edi t or on ac count 3. r educ ed or dec r ea se d 4. as se t s 5. as se t or pr oper t y 6. equa l 7. ac count s pa yabl e or l i abi l i t y 8. ana l yze

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