Problem 1-1Charles CompanyBalance SheetAs of December 31

AssetsLiabilities and Owners' Equity

Current Assets:Current Liabilities:Cash$12,000.00Inventory$95,000.00Other items$13,000.00

Total current assets:$120,000.00Total current liabilities:0.0

Non Current Assets:Non current Liabilities:Loan from First City Bank$40,000.00

Total Non current assets:0.0Total non current liabilities:$40,000.00

Owners' equity:Paid in capital$80,000.00Total owners' equity:$80,000.00

Total assets$120,000.00Total liabilities and owners' equity:$120,000.00

Problem 1-2Data as per the problem:Legend:Year 1Year 2Year 3Year 4Missing valuesCurrent assets$113,624.00$90,442.00$85,124.00$69,090.00Noncurrent assets$410,976.00$198,014.00$162,011.00$151,021.00Total assets$524,600.00$288,456.00$247,135.00$220,111.00Basic accounting equation used:Current liabilities$56,142.00$40,220.00$15,583.00$17,539.00Assets = Liabilities + Owners' equityNoncurrent liabilities$240,518.00$78,585.00$60,100.00$30,222.00wherePaid-in capital$214,155.00$173,295.00$170,000.00$170,000.00Assets = Current assets + Noncurrent assetsRetained earnings$13,785.00$-3,644.00 $1,452.00$2,350.00Liabilities = Current liabilities + Noncurrent liabilitiesTotal liabilities and owners' equity$524,600.00$288,456.00$247,135.00$220,111.00Owners' equity = Paid-in capital + Retained earnings

Problem 1-3Data as per the problemYear 1Year 2Year 3Year 4Legend:Sales$12,011.00$11,968.00$11,545.00$10,000.00Missing valuesCost of goods sold$3,011.00$2,992.00$2,886.00$2,500.00Gross margin$9,000.00$8,976.00$8,659.00$7,500.00Other expenses$6,201.00$6,429.00$6,296.00$5,300.00Basic accounting equation used:Profit before taxes$2,799.00$2,547.00$2,363.00$2,200.00Gross margin = Sales revenue - Cost of salesTax expense$1,120.00$1,019.00$945.00$870.00Revenues - Expenses = Net incomeNet income$1,679.00$1,528.00$1,418.00$1,330.00

Problem 1-4CashAccounts ReceivableSupplies InventoryEquipmentAccounts PayableOwners' EquityDescription of Transaction(a) Explanation of transaction1$20,000.00$20,000.00InvestmentOwners invested $20000 in cash to start the business2$-5,000.00 $7,000.00$2,000.00Equipment costing $7000 of which $5000 was paid in cash3$-1,000.00 $1,000.00Purchased supplies worth $1000 on cash payment4$-4,500.00 $-4,500.00 SalariesPaid $4500 employee salaries in cash5$5,000.00$5,000.00$10,000.00RevenuesEarned revenue of $10000 of which $5000 was paid in cash6$-1,500.00 $-1,500.00 Paid $1500 of the $2000 owed to equipment supplier7$1,000.00$-1,000.00 Received $1000 of the $5000 pending Revenue8$-750.00 $-750.00 RentThe month's rent of $750 was paid in cash9$-500.00 $-500.00 UtilitiesPurchased utilities worth $500 in cash10$200.00$-200.00 TravelTravel expense of $200 on credit11$-200.00 $-200.00 Drawing of supplies worth $200 by owners

(b) Changes in the balance sheet during the month of July:Acme ConsultingBalance SheetAs of July 31

AssetsLiabilities and Owners' Equity

Current Assets:Current Liabilities:Cash$12,750.00Accounts Payable$700.00Equipment$7,000.00Supplies inventory$800.00Accounts receivable$4,000.00

Total current assets:$24,550.00Total current liabilities:$700.00

Non Current Assets:Non current Liabilities:

Total Non current assets:0.0Total non current liabilities:0.0

Owners' equity:Paid in capital$23,850.00Total owners' equity:$23,850.00

Total assets$24,550.00Total liabilities and owners' equity:$24,550.00

(c) Income Statement:(d) Changes in cash account:Acme ConsultingIncome StatementFor the month of JulyAcme ConsultingCash flow statementFor the month of July

Revenues$10,000.00 + RecieptsCost of Goods sold0.0Owners' investment$20,000.00Gross Margin$10,000.00Revenue$5,000.00Less Operating ExpensesAccounts Receivable$1,000.00Salaries paid$-4,500.00 Total reciepts$26,000.00Rent paid$-750.00 - PaymentsUtilities expense$-500.00 Equipment$5,000.00Supplies$-200.00 Supplies$1,000.00Travel expense$-200.00 Salaries$4,500.00Net Income$3,850.00Accounts Payable$1,500.00Rent$750.00Utilities$500.00Total$13,250.00

Closing Cash balance$12,750.00

(e) Cash account includes transactions which involves cash only whereas Income statement includes transactions which effect then revenues and expenses both in cash and credit. In the given problem, the cash account includes owners' equity which is not part of income statement. Also, income statement includes revenues which have not yet been recieved in cash.

Problem 1-5(a) Analysis of month's transactions:CashAccounts ReceivableSupplies InventoryEquipmentAccounts PayableOwners' EquityDescription of Transaction(b) Explanation of transactions1$25,000.00$25,000.00InvestmentInvestment from owners increased the cash account by $200002$-500.00 $-500.00 RentPayment of rent in cash reduced owners equity3$8,000.00$8,000.00Equipment purchased on credit increased liabilities4$-500.00 $500.00office suppliesPurchase of supplies on cash payment reduced cash account and increased supplies inventory5$-750.00 $-750.00 Advertising costAdvertising cost of $750 paid in cash reduced owners equity by $7506$-3,000.00 $-3,000.00 SalariesSalaries paid in cash reduce owners' equity7$2,000.00$8,000.00$10,000.00Travel commission$2000 of the $10000 travel commission received in cash increases cash account and rest $8000 increases Accounts recievable8$-5,000.00 $-5,000.00 Outstanding amount cleared reduces cash account9$-100.00 $-100.00 Use of office supplies reduces owners equity10$1,000.00$-1,000.00 Miscellaneous expensesCredit expenses increases accounts payable and reduces owners' equity

(c) Income statement(d) Changes in cash account:Bon Voyage TravelIncome StatementFor the month of JuneAcme ConsultingCash flow statementFor the month of July

Revenues$10,000.00 + RecieptsCost of Goods sold0.0Owners' investment$25,000.00Gross Margin$10,000.00Revenue$2,000.00Less Operating ExpensesTotal reciepts$27,000.00Salaries paid$-3,000.00 - PaymentsRent paid$-500.00 Rent$500.00Advertising cost$-750.00 Supplies$500.00Supplies$-100.00 Advertising cost$750.00Miscellaneous expenses$-1,000.00 Accounts Payable$5,000.00Net Income$4,650.00Salaries$3,000.00Total$9,750.00

Closing Cash balance$17,250.00

(e) Cash account includes transactions which involves cash only whereas Income statement includes transactions which effect then revenues and expenses both in cash and credit. In the given problem, the cash account includes owners' equity which is not part of income statement.

Problem 2-1a.Assets$95,000.00Liabilities$40,000.00Equations Used:Assets = Liabilities + Owners' equityOwners' equity =$55,000.00Liabilities = Current liabilites + Noncurrent liabilitiesAssets = current assets + Noncurrent assetsOwners' equity = paid in capital + Retained earningsb.Assets$65,000.00Current ratio = Current assets/Current liabilitiesOwner's equity$40,000.00

Liabilities =$25,000.00

c.Current assets$25,000.00Liabilities$40,000.00Owners' equity$55,000.00

Noncurrent assets =$70,000.00d.Current ratio2.2:1Current assets$33,000.00noncurrent assets$55,000.00

Current liabilities =$15,000.00(Since all liabilities are current, Liabilities = $15000)Owners' equity =$73,000.00e.Noncurrent assets60000Total assets95000Owners' equity70000Current Assets =35000Current Liabilities = Liabilities =25000Current Ratio =1.4

Problem 2-2J. L. George CompanyBalance SheetAs of June 30, xxxx

AssetsLiabilities and Owners' Equity

Current Assets:Current Liabilities:Cash$89,000.00Accounts Payable$241,000.00Accounts Recievable$505,000.00Accrued expenses$107,000.00Equipment (at cost)$761,000.00Notes payable$200,000.00Inventories$513,000.00Estimated tax$125,000.00Marketable securities$379,000.00Investment in the Peerless Company$320,000.00Total current assets:$2,567,000.00Total current liabilities:$673,000.00

Non Current Assets:Non current Liabilities:Land (at cost)$230,000.00Bonds Payable$700,000.00Buildings(at cost)$1,120,000.00Less Accumulated depreciation on buildings$-538,000.00 Less Accumulated depreciation on equipment$-386,000.00 Total Non current assets:$426,000.00Total non current liabilities:$700,000.00

Owners' equity:Capital Stock$1,000,000.00Retained earnings$620,000.00Total owners' equity:$1,620,000.00

Total assets$2,993,000.00Total liabilities and owners' equity:$2,993,000.00

Problem 2-3CashAccounts ReceivableInventoryEquipmentLiabilitiesOwners' EquityDescription of Transaction1$100,000.00$100,000.00Paid in capital increases cash and equal amount of capital stock issued increases owners' equity2$-25,000.00 $25,000.00Bonds payable refunded with equal amount of stcok reduces liability and increases owners' equity3$-8,500.00 $-8,500.00 Depriciation on plant and equipment reduces Equipment value and owners' equity4$-15,900.00 $15,900.00purchase of equipment on cash payment has no net effect on assets5$9,400.00$9,400.00Purchase of equipment on credit increases assets and liabilities6$7,200.00$-4,500.00 $2,700.00Sale of equipment on credit with a higher value increases net assets and also increases owners' equity7$3,500.00$-3,500.00 Reciept of cash for previous credit sales increases assets and reduces liabilities8$3,000.00$-3,000.00 Dividends declared reduces owners' equity and increases liabilities9$-3,000.00 $-3,000.00 Dividends paid reduces assets and liabilities10No net effect of stock split on assets, liabilities or owners' equity

Problem 2-5MARVIN COMPANYBalance SheetAs of January 31

AssetsLiabilities and Owners' Equity

Current Assets:Current Liabilities:Cash$15,900.00Notes payable$20,000.00Inventory$46,500.00Accounts payable$7,000.00Total current assets:$62,400.00Total current liabilities:$27,000.00

Non Current Assets:Non current Liabilities:Land$20,000.00Insurance$2,800.00Total Non current assets:$22,800.00Total non current liabilities:0.0

Owners' equity:Capital$50,800.00Retained earnings$7,400.00Total owners' equity:$58,200.00

Total assets$85,200.00Total liabilities and owners' equity:$85,200.00