Chapter 1

Accounting in Action

Problem 01 A Barones Repair Shop was started on May 1 by Nancy Barone. A summary of May transactions is presented below. 1. Invested 1!"!!! cash to start the repair shop. #. $urchased e%uipment for &"!!! cash. '. $aid (!! cash for May office rent. (. $aid &!! cash for supplies. &. Incurred #&! of advertisin) costs in the Beacon News on account. *. Received &"1!! in cash from customers for repair service. +. ,ithdrew 1"!!! cash for personal use. -. $aid part.time employee salaries #"!!!. /. $aid utility bills 1(!. 1!. $rovided repair service on account to customers +&!. 11. 0ollected cash of 1#! for services billed in transaction 11!2. Instructions 1a2 $repare a tabular analysis of the transactions" usin) the followin) column headin)s3 0ash" Accounts Receivable" Supplies" 4%uipment" Accounts $ayable" N. Barone" 0apital5 N. Barone" 6rawin)s5 Revenues" and 47penses. 1b2 8rom an analysis of the owners e%uity columns" compute the net income or net loss for May. Problem - 2 A Maria 9on:ale: opened a veterinary business in Nashville";ennessee" on Au)ust 1. <n Au)ust '1" the balance sheet showed 0ash /"!!!" Accounts Receivable 1"+!!" Supplies *!!" <ffice 4%uipment *"!!!" Accounts $ayable '"*!!" and M. 9on:ale:" 0apital 1'"+!!. 6urin) September the followin) transactions occurred. 1. $aid #"/!! cash on accounts payable. #. 0ollected 1"'!! of accounts receivable. '. $urchased additional office e%uipment for #"1!!" payin) -!! in cash and the balance on account. (. 4arned revenue of -"!!!" of which #"&!! is paid in cash and the balance is due in <ctober. &. ,ithdrew 1"!!! cash for personal use. *. $aid salaries 1"+!!" rent for September /!!" and advertisin) e7pense '!!. +. Incurred utilities e7pense for month on account 1+!. -. Received 1!"!!! from 0apital Ban=>money borrowed on a note payable. Instructions 1a2 $repare a tabular analysis of the September transactions be)innin) with Au)ust '1 balances. ;he column headin)s should be as follows3 0ash Accounts Receivable Supplies <ffice 4%uipment Notes $ayable Accounts $ayable M. 9on:ale:" 0apital M. 9on:ale:" 6rawin)s Revenues 47penses.

Problem - 03 Mar= Miller started his own delivery service" Miller 6eliveries" on ?une 1" #!1!.;he followin) transactions occurred durin) the month of ?une. ?une 1 Mar= invested 1!"!!! cash in the business. # $urchased a used van for deliveries for 1#"!!!. Mar= paid #"!!! cash and si)ned a note payable for the remainin) balance. ' $aid &!! for office rent for the month. & $erformed ("(!! of services on account. / ,ithdrew #!! cash for personal use. 1# $urchased supplies for 1&! on account.

1& Received a cash payment of 1"#&! for services provided on ?une &. 1+ $urchased )asoline for 1!! on account. #! Received a cash payment of 1"&!! for services provided. #' Made a cash payment of &!! on the note payable. #* $aid #&! for utilities. #/ $aid for the )asoline purchased on account on ?une 1+. '! $aid 1"!!! for employee salaries. Instructions 1a2 Show the effects of the previous transactions on the accountin) e%uation usin). Problem 05 <n April 1"@innie @enuchi established @innies ;ravel A)ency. ;he followin) transactions were completed durin) the month. 1. Invested 1&"!!! cash to start the a)ency. #. $aid *!! cash for April office rent. '. $urchased office e%uipment for '"!!! cash. (. Incurred +!! of advertisin) costs in the 0hica)o ;ribune" on account. &. $aid -!! cash for office supplies. *. 4arned 11"!!! for services rendered3 '"!!! cash is received from customers" and the balance of -"!!! is billed to customers on account. +. ,ithdrew &!! cash for personal use. -. $aid 0hica)o ;ribune amount due in transaction 1(2. /. $aid employees salaries #"#!!. 1!. Received ("!!! in cash from customers who have previously been billed in transaction 1*2. Instructions 1a2 $repare a tabular analysis of the transactions usin) the followin) column headin)s3 0ash" Accounts Receivable" Supplies" <ffice 4%uipment" Accounts $ayable"@.@enuchi" 0apital5 @.@enuchi" 6rawin)s5 Revenues" and 47penses. 1b2 8rom an analysis of the owners e%uity columns" compute the net income or net loss for April.

Problem 06 ?enny Brown opened a law office" on ?uly 1" #!1!. <n ?uly '1" the balance sheet showed 0ash &"!!!" Accounts Receivable 1"&!!" Supplies &!!" <ffice 4%uipment *"!!!" Accounts $ayable ("#!!" and ?enny Brown"0apital -"-!!. 6urin) Au)ust the followin) transactions occurred. 1. 0ollected 1"#!! of accounts receivable. #. $aid #"-!! cash on accounts payable. '. 4arned revenue of -"!!! of which '"!!! is collected in cash and the balance is due in September. (. $urchased additional office e%uipment for #"!!!" payin) (!! in cash and the balance on account. &. $aid salaries #"&!!" rent for Au)ust /!!" and advertisin) e7penses (!!. *. ,ithdrew +!! in cash for personal use. +. Received 1"&!! from Standard 8ederal Ban=Amoney borrowed on a note payable. -. Incurred utility e7penses for month on account ##!. Instructions 1a2 $repare a tabular analysis of the Au)ust transactions be)innin) with ?uly '1 balances. ;he column headin)s should be as follows3 0ashAccounts ReceivableSupplies<ffice 4%uipmentNotes $ayableAccounts $ayable?. Brown" 0apital ?. Brown" 6rawin)s Revenues 47penses. 1b2 $repare an income statement for Au)ust" an owners e%uity statement for Au)ust" and a balance sheet at Au)ust '1.