Problem 1-1
CHARLES COMPANY
BALANCE SHEET AS OF DECEMBER 31, ----.
Assets Liabilities and Owners’ Equity
Cash $ 12,000 Bank $ 40,000
..................................... loan
..........................................
Inventory 95,000 Owners’ Equity
.....................................
Other 13,000 Owners’ 80,000
assets equity
..................................... .......................................
Total liabilities and
Total $120,000 owners’ $120,000
assets equity
..................................... ..........................................
Problem 1-2
The missing numbers are:
Year 1
Noncurrent $410,976
assets
.................................................................
Noncurrent 240,518
liabilities
.................................................................
Year 2
Current $ 90,442
assets
.................................................................
Total 288,456
assets
.................................................................
Noncurrent 78,585
liabilities
.................................................................
Year 3
Total $247,135
assets
.................................................................
Current 15,583
liabilities
.................................................................
Total liabilities and owners’ 247,135
equity
.................................................................
Year 4
Current $ 69,090
assets
.................................................................
Current 17,539
liabilities
.................................................................
Problem 1-4
a) The explanation of these 11 transactions is:
1. Owners invest $20,000 of equity capital in Acme Consulting.
2. Equipment costing $7,000 is purchased for $5,000 cash and an account payable of $2,000.
3. Supplies inventory costing $1,000 is bought for cash.
4. Salaries of $4,500 are paid in cash.
5. Revenues of $10,000 are earned, of which $5,000 has been recovered in cash. The remaining $5,000 is
owed to the company by its customers.
6. Accounts payable of $1,500 are paid in cash.
7. Customers pay $1,000 of the $5,000 they owe the company.
8. Rent Expense of $750 is paid in cash.
9. Utilities of $500 are paid in cash.
10. A $200 travel expense has been incurred but not yet paid.
11. Supplies inventory costing $200 are consumed.
Problem 1-5
a)
Accounts Supplies Accounts Owners’
Cash + Receivable + Inventory + Equipment = Payable + Equity
1. + $25,000 + $25,000 Investment
2. - 500 - 500 Rent
3. + $8,000 + $8,000
4. - 500 + $500
5. - 750 - 750 Advertising
6. - 3,000 - 3,000 Salaries
7. + 2,000 + $8,000 + 10,000 Commissions
8. - 5,000 - 5,000
9. - 100 - 100
10. + 1,000 - 1,000 Expenses
