ACC 557 Week 1 Assignment
E1-2 (a) The following are users of financial statements.
______Customers ______Securities and Exchange Commission
______Internal Revenue Service ______Store manager
______Labor unions ______Suppliers
______Marketing manager ______Vice-president of finance
Identify the users as being either external users or internal users.
(b) The following questions could be asked by an internal user or an external user.
______Can we afford to give our employees a pay raise?
______Did the company earn a satisfactory income?
______Do we need to borrow in the near future?
______How does the company’s profitability compare to other companies?
______What does it cost us to manufacture each unit produced?
______Which product should we emphasize?
______Will the company be able to pay its short-term debts?
Identify each of the questions as being more likely asked by an internal user or an external user.
ACC 557 Week 1 Assignment
E1-4 The following situations involve accounting principles and assumptions.
1. Grossman Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Grossman reports the buildings at market value in its accounting reports.
2. Jones Company includes in its accounting records only transaction data that can be expressed in terms of money.
3. Caleb Borke, president of Caleb’s Cantina, records his personal living costs as expenses of the Cantina.
For each of the three situations, say if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated.
ACC 557 E1-8
An analysis of the transactions made by S. Moses & Co., a certified public accounting firm, for the month of August is shown below. Each increase and decrease in stockholder's equity is explained.
Cash + Accounts
Receivable + Supplies + Office
Equipment = Accounts
Payable + Stockholder's Equity
1. +$15,000 +$15,000 Investment
2.-2,000 +$5,000 +$3,000
4.+4,600 +$3,700 +8,300 Service Revenue
6.-2,000 -2,000 Dividends
7.-650 -650 Rent Expense
9.-4,900 -4,900 Salaries Expense
10. +500 -500 Utilities Expense
(a) How much did stockholder's equity increase for the month?
(b) Compute the amount of net income for the month. (If a net loss, record amount using either a negative sign preceding the number eg -45 or parentheses eg (45).)
ACC 557 Week 1 E1-14
Deer Park, a public camping ground near the Lake Mead National Recreation Area, has compiled the following financial information as of December 31, 2008.
Revenues during 2008—camping fees $140,000 Notes payable $ 60,000
Revenues during 2008—general store 50,000 Expenses during 2008 150,000
Accounts payable 11,000 Supplies on hand 2,500
Cash on hand 23,000 Common stock 20,000
Original cost of equipment 105,500 Retained earnings ?
Market value of equipment 140,000
(a) Determine Deer Park’s net income for 2008.
(b) Prepare a balance sheet for Deer Park as of December 31, 2008.
ACC 557 Week 1 P1-4A
Mark Miller started a delivery service, Miller Deliveries, on June 1, 2008.The following transactions occurred during the month of June.
June 1 Stockholders invested $10,000 cash in the business.
2 Purchased a used van for deliveries for $12,000. Mark paid $2,000 cash and signed a note payable for the remaining balance.
3 Paid $500 for office rent for the month.
5 Performed $4,400 of services on account.
9 Paid $200 in cash dividends.
12 Purchased supplies for $150 on account.
15 Received a cash payment of $1,250 for services provided on June 5.
17 Purchased gasoline for $100 on account.
20 Received a cash payment of $1,500 for services provided.
23 Made a cash payment of $500 on the note payable.
26 Paid $250 for utilities.
29 Paid for the gasoline purchased on account on June 17.
30 Paid $1,000 for employee salaries.
(a) Show the effects of the previous transactions on the accounting equation using the following
Problems: Set A 39
(b) Net income $1,900
(a) Retained earnings $3,850
(b) Net income $4,050
(c) Cash $8,200
Assets Liabilities Equity
Accounts Delivery Notes Accounts Common Retained
Date Cash _ Receivable _ Supplies _ Van _ Payable _ Payable _ Stock _ Earnings
Include explanations for any changes in the Retained Earnings account in your analysis.
(b) Prepare an income statement for the month of June.
(c) Prepare a balance sheet at June 30, 2008.
ACC 557 Week 1 P1–5A
Financial statement information about four different companies is as follows.
(a) Determine the missing amounts. (Hint: For example, to solve for (a), Assets _ Liabilities _
Stockholders’ Equity _ $45,000.)
(b) Prepare the retained earnings statement for Yates Company. Assume beginning retained
earnings was $20,000.
(c) Write a memorandum explaining the sequence for preparing financial statements and the interrelationship of the retained earnings statement to the income statement and
Karma Yates McCain Dench
January 1, 2008
Assets $ 95,000 $110,000 (g) $170,000
Liabilities 50,000 (d) 75,000 ( j)
Stockholders’ equity (a) 60,000 45,000 90,000
December 31, 2008
Assets (b) 137,000 200,000 (k)
Liabilities 55,000 75,000 (h) 80,000
Stockholders’ equity 60,000 (e) 130,000 170,000
Stockholders’ equity changes in year
Additional investment (c) 15,000 10,000 15,000
Dividends 25,000 (f) 14,000 20,000
Total revenues 350,000 420,000 (i) 520,000
Total expenses 320,000 385,000 342,000 (l)
ACC/557 Week 1