ACC 215 - Principles of Financial Accounting

Chapter 1

HOMEWORK I

EX 1-18. Retained earnings statement

Obj. 5 Financial information related to Healthy Products Company for the month ended
November 30, 2018, is as follows:

Net income for November $93,500

Cash dividends paid during November 7,000
Retained earnings, November 1, 2018 2,940,000
INSTRUCTIONS
1. Prepare a retained earnings statement for the month ended November 30, 2018.
2. Why is the retained earnings statement prepared before the November 30, 2018,
balance sheet?

EX 1-19. Income statement

Obj. 5 Imaging Services was organized on March 1, 2018. A summary of the revenue
and expense transactions for March follows:

Fees earned $482,000

Wages expense 300,000
Rent expense 41,500
Supplies expense 3,600
Miscellaneous expense 1,900
INSTRUCTIONS
Prepare an income statement for the month ended March 31.

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EX 1-21. Balance sheets, net income
Obj. 5 Financial information related to Ebony Interiors for February and March 2018 is
as follows:
February 29, 2018 March 31, 2018
Cash 320,000 380,000
Accounts receivable 800,000 960,000
Supplies 30,000 35,000
Accounts payable 310,000 400,000
Common stock 200,000 200,000
Retained earnings ? ?
INSTRUCTIONS
1. Prepare balance sheets for Ebony Interiors as of February 29 and March 31,
2018.
2. Determine the amount of net income for March, assuming that no additional
common stock was issued and no dividends were paid during the month.
3. Determine the amount of net income for March, assuming that no additional
common stock was issued, but dividends of $50,000 were paid during the month.

PR 1-2A. Financial statements

Obj. 5 The amounts of the assets and liabilities of Journey Travel Agency at December
31, 2018, the end of the year, and its revenue and expenses for the year follow. The
retained earnings were $1,341,000 on January 1, 2018, the beginning of the year.
During the year, dividends of $75,000 were paid.
Accounts payable $ 6 Miscellaneous $ 14,5
9,500 expense 00
Accounts receivable 236,500 Rent expense 22,500
Cash 190,500 Supplies 7,000
Common stock 450,000 Supplies expense 11,300
Fees earned 383,500 Utilities expense 16,700
Land 1,500,00 Wages expense 170,000
0

INSTRUCTIONS
1. Prepare an income statement for the year ended December 31, 2018.
2. Prepare a retained earnings statement for the year ended December 31, 2018.
3. Prepare a balance sheet as of December 31, 2018.
4. What item appears on both the retained earnings statement and the balance
sheet?

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PR 1-2B. Financial statements
Obj. 5 The amounts of the assets and liabilities of Wilderness Travel Service at April 30,
2018, the end of the year, and its revenue and expenses for the year follow. The
retained earnings were $145,000 at May 1, 2017, the beginning of the year, and
dividends of $40,000 were paid during the year.
Accounts payable $ 25, Rent expense $ 75,0
000 00
Accounts receivable 210,00 Supplies 9,000
0
Cash 146,00 Supplies expense 12,000
0
Common stock 35,000 Taxes expense 10,000
Fees earned 875,00 Utilities expense 38,000
0
Miscellaneous expense 15,000 Wages expense 525,000

INSTRUCTIONS
1. Prepare an income statement for the year ended April 30, 2018.
2. Prepare a retained earnings statement for the year ended April 30, 2018.
3. Prepare a balance sheet as of April 30, 2018.
4. What item appears on both the income statement and retained earnings
statement?

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PR 1-3A. Financial statements
Obj. 5 Seth Feye established Reliance Financial Services on July 1, 2018. Reliance
Financial Services offers financial planning advice to its clients. The effect of each
transaction and the balances after each transaction for July follow:

INSTRUCTIONS
1. Prepare an income statement for the month ended July 31, 2018.
2. Prepare a retained earnings statement for the month ended July 31, 2018.
3. Prepare a balance sheet as of July 31, 2018.
4. (Optional) Prepare a statement of cash flows for the month ending July 31, 2018

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PR 1-3B. Financial statements

Obj. 5 Jose Loder established Bronco Consulting on August 1, 2018. The effect of each
transaction and the balances after each transaction for August follow:

INSTRUCTIONS
1. Prepare an income statement for the month ended August 31, 2018.
2. Prepare a retained earnings statement for the month ended August 31, 2018.
3. Prepare a balance sheet as of August 31, 2018.
4. (Optional) Prepare a statement of cash flows for the month ending August 31,
2018.

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PR 1-5A. Transactions; financial statements
Obj. 4, 5 D'Lite Dry Cleaners is owned and operated by Joel Palk. A building and
equipment are currently being rented, pending expansion to new facilities. The actual
work of dry cleaning is done by another company at wholesale rates. The assets,
liabilities, and common stock of the business on July 1, 2018, are as follows: Cash,
$45,000; Accounts Receivable, $93,000; Supplies, $7,000; Land, $75,000; Accounts
Payable, $40,000; Common Stock, $60,000. Business transactions during July are
summarized as follows:
Joel Palk invested additional cash in exchange for common stock with a deposit of
$35,000 in the business bank account.
Paid $50,000 for the purchase of land adjacent to land currently owned by D'Lite Dry
Cleaners as a future building site.
Received cash from customers for dry cleaning revenue, $32,125.
Paid rent for the month, $6,000.
Purchased supplies on account, $2,500.
Paid creditors on account, $22,800.
Charged customers for dry cleaning revenue on account, $84,750.
Received monthly invoice for dry cleaning expense for July (to be paid on August 10),
$29,500.
Paid the following: wages expense, $7,500; truck expense, $2,500; utilities expense,
$1,300; miscellaneous expense, $2,700.
Received cash from customers on account, $88,000.
Determined that the cost of supplies on hand was $5,900; therefore, the cost of supplies
used during the month was $3,600.
Paid dividends, $12,000.
INSTRUCTIONS
1. Determine the amount of retained earnings as of July 1, 2018.
2. State the assets, liabilities, and stockholders' equity as of July 1 in equation form
similar to that shown in this chapter. In tabular form below the equation, indicate
increases and decreases resulting from each transaction and the new balances
after each transaction.
3. Prepare an income statement for July, a retained earnings statement for July,
and a balance sheet as of July 31.
4. (Optional) Prepare a statement of cash flows for July.

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PR 1-5B. Transactions; financial statements
Obj. 4, 5 Bev's Dry Cleaners is owned and operated by Beverly Zahn. A building and
equipment are currently being rented, pending expansion to new facilities. The actual
work of dry cleaning is done by another company at wholesale rates. The assets,
liabilities, and common stock of the business on November 1, 2018, are as follows:
Cash, $39,000; Accounts Receivable, $80,000; Supplies, $11,000; Land, $50,000;
Accounts Payable, $31,500; Common Stock, $50,000. Business transactions during
November are summarized as follows:
A. Beverly Zahn invested additional cash in exchange for common stock with a
deposit of $21,000 in the business bank account.
B. Purchased land adjacent to land currently owned by Bev's Dry Cleaners to use in
the future as a parking lot, paying cash of $35,000.
C. Paid rent for the month, $4,000.
D. Charged customers for dry cleaning revenue on account, $72,000.
E. Paid creditors on account, $20,000.
F. Purchased supplies on account, $8,000.
G. Received cash from customers for dry cleaning revenue, $38,000.
H. Received cash from customers on account, $77,000.
I. Received monthly invoice for dry cleaning expense for November (to be paid on
December 10), $29,450.
J. Paid the following: wages expense, $24,000; truck expense, $2,100; utilities
expense, $1,800; miscellaneous expense, $1,300.
K. Determined that the cost of supplies on hand was $11,800; therefore, the cost of
supplies used during the month was $7,200.
L. Paid dividends, $5,000.

INSTRUCTIONS
1. Determine the amount of retained earnings as of November 1.
2. State the assets, liabilities, and stockholders' equity as of November 1 in
equation form similar to that shown in this chapter. In tabular form below the
equation, indicate increases and decreases resulting from each transaction and
the new balances after each transaction.
3. Prepare an income statement for November, a retained earnings statement for
November, and a balance sheet as of November 30.
4. (Optional) Prepare a statement of cash flows for November.

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