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Principles of Accounting, Volume 1: Financial Accounting

Problem Set A

Principles of Accounting, Volume 1: Financial AccountingProblem Set A
PA 1.

LO 2.1The following information is taken from the records of Baklava Bakery for the year 2019.

Revenues: January 22,500; Gains: February 1,200; Losses: March 3,700; Expenses: February 21,620; Gains: January 0; Revenues: March 42,800; Losses: February 1,600; Expenses: March 45,100; Losses: January 0; Revenues: February 37,550; Expenses: January 20,760; Gains: March 5,600.
  1. Calculate net income or net loss for January.
  2. Calculate net income or net loss for February.
  3. Calculate net income or net loss for March.
  4. For each situation, comment on how a stakeholder might view the firm’s performance. (Hint: Think about the source of the income or loss.)
PA 2.

LO 2.1Each situation below relates to an independent company’s owners’ equity.

Beginning Balance plus Net Income minus Net Loss plus Investments minus Distributions equals Ending Balance, respectively: ?, 16,500, 0, 22,300, 1,750, 37,050; 63,180, 0, 12,000, 0, ?, 44,880; 275,300, ?, 0, 0, 24,100, 299,400.
  1. Calculate the missing values.
  2. Based on your calculations, make observations about each company.
PA 3.

LO 2.1The following information is from a new business. Comment on the year-to-year changes in the accounts and possible sources and uses of funds (how were the funds obtained and used).

Assets minus Liabilities equals Owner’s Equity, respectively: End of Year 1: 245,000, 120,000, 125,000; End of Year 2: 286,000, 150,000, 136,000; End of Year 3: 212,000, 80,000, 132,000.
PA 4.

LO 2.1Each of the following situations relates to a different company.

Revenues, Expenses, Gains, Losses, and Net Income (Loss), respectively: Company A 16,500, 12,400, 750, 900, ?; Company B 167,320, ?, 1,350, 6,240, (9,250); Company C ?, 72,300, 0, 5,200, 5,100; Company D 235,000, 241,000, ?, 0, 6,300.
  1. For each of these independent situations, find the missing amounts.
  2. How would stakeholders view the financial performance of each company? Explain.
PA 5.

LO 2.2For each of the following independent transactions, indicate whether there was an increase, a decrease, or no impact for each financial statement element.

 
Transaction Assets Liabilities Owners’ Equity
Paid cash for expenses      
Sold common stock for cash      
Owe vendor for purchase of asset      
Paid owners for dividends      
Paid vendor for amount previously owed      
Table 2.9
PA 6.

LO 2.2Olivia’s Apple Orchard had the following transactions during the month of September, the first month in business.

Transaction, Amount, Asset equals Liability plus Owner’s Equity (respectively): Amount owed for land purchase $50,000, 50,000, 50,000, 0; Apple sales: cash, 3,000, ?, ?, ?; Apple sales: credit 6,000, ?, ?, ?; Collections of credit sales 4,000, ?, ?, ?; Cash purchase of equipment 10,000, ?, ?, ?; Owner investments 25,000, ?, ?, ?; Wages expenses paid 6,000, ?, ?, ?; Fuel expenses paid 400, ?, ?, ?; Amount owed for utility expense 1,000, ?, ?, ?; Current Totals: - , 50,000, 50,000, 0.

Complete the chart to determine the ending balances. As an example, the first transaction has been completed. Note: Negative amounts should be indicated with minus signs (–) and unaffected should be noted as $0.

(Hints: 1. each transaction will involve two financial statement elements; 2. the net impact of the transaction may be $0.)

PA 7.

LO 2.2Using the information in Exercise 2.6, determine the amount of revenue and expenses for Olivia’s Apple Orchard for the month of September.

PA 8.

LO 2.3The following ten transactions occurred during the July grand opening of the Pancake Palace. Assume all Retained Earnings transactions relate to the primary purpose of the business.

Increase Cash $50,000, increase Common Stock $50,000. Decrease Cash 6,000, increase Inventory 6,000. Increase Equipment 22,000, increase Accounts Payable 22,000. Increase Cash 1,250, increase Retained Earnings 1,250. Decrease Cash 750, decrease Retained Earnings 750 Increase Accounts Payable 600, decrease Retained Earnings 600. Increase Wages Payable 3,000, decrease Retained Earnings 3,000. Increase Cash 3,200, increase Retained Earnings 3,200 Increase Liabilities 175, decrease Retained Earnings 175. Decrease Cash 1,000, increase Equipment 1,000.
  1. Calculate the ending balance for each account.
  2. Create the income statement.
  3. Create the statement of owner’s equity.
  4. Create the balance sheet.
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