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Chap 1 Homework

The document contains information about accounting principles and transactions for multiple businesses: 1) Odie Company's accounts for the year are given, and the reader is asked to calculate net income using the balance sheet equation. 2) Several situations at Buddy's Foreign Automotive are described, and the reader is asked to identify the appropriate accounting principle for each and suggest correct actions. 3) Transactions undertaken by Soo Lin Consultant in April are listed, and the reader is asked to show the effects on the accounting equation. 4) Information is provided to prepare financial statements for Ernst Consulting for October, including an income statement, statement of owner's equity, and balance sheet.

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Rakhimjon Bakhromov
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219 views2 pages

Chap 1 Homework

The document contains information about accounting principles and transactions for multiple businesses: 1) Odie Company's accounts for the year are given, and the reader is asked to calculate net income using the balance sheet equation. 2) Several situations at Buddy's Foreign Automotive are described, and the reader is asked to identify the appropriate accounting principle for each and suggest correct actions. 3) Transactions undertaken by Soo Lin Consultant in April are listed, and the reader is asked to show the effects on the accounting equation. 4) Information is provided to prepare financial statements for Ernst Consulting for October, including an income statement, statement of owner's equity, and balance sheet.

Uploaded by

Rakhimjon Bakhromov
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Chapter 1 Accounting in Business

1. The accounts of Odie Company with the increases or decreases that occurred during
the past year are as follows:
Account Increase Decrease
Cash $25,000
Accounts receivable $(5,000)
Accounts payable (11,000)
Notes payable 16,000
Except for net income, an investment of $3,000 by the owner, and a withdrawal of $11,000 by
the owner, no other items affected owner's equity. Using the balance sheet equation,
compute net income for the past year.

2. You are reviewing the accounting records of Buddy's Foreign Automotive, owned by
Bruce Jones. You have uncovered the following situations. List the appropriate accounting
principle related to each independent scenario and suggest a correct action for each.
1. In August, a check for $500 was written to Community Sports. This amount represents
soccer camp for his daughter Cassie.
2. Bruce plans a Going Out of Business Sale for June, since he will be closing the business
for a month-long vacation in July. He plans to reopen August 1 and will continue operating
Buddy's Foreign Automotive indefinitely.
3. Buddy received a shipment of tools from Ontario, Canada. The invoice was stated in
Canadian dollars.
4. Sandy Lane paid $1,500 for a major repair service. The amount was recorded as revenue.
The parts for the repair must be ordered from overseas and the service won't be complete
until the following month.

3. Soo Lin began an Internet Consulting practice and completed these transactions
during April of the current year:

April. 1 Invested $100,000 of her personal savings into a checking


account opened in the name of the business.
2 Rented office space and paid $1,200 cash for the month of
September.
3 Purchased office equipment for $30,000, paying $8,000 cash
and agreeing to pay the balance in one year.
4 Purchased office supplies for $750 cash.
8 Completed work for a client and immediately collected
cash for the services.
$2,700
15 Completed $3,600 services for a client on credit.
20 Received $3,600 from a client for the work completed on
September 15.
30 Paid the office secretary's monthly salary, $3,000 cash.
30 Lin withdrew $2,000 for personal use.
1
Show the effects of the above transactions on the accounting equation of Soo Lin,
Consultant. Use the following format for your answers. The first item is shown as
an example. Increase = I Decrease = D No effect = N

Date Assets Liabilities Equity


Example:
April 1 I N I

4. On October 1, Ebony Ernst organized Ernst Consulting; on October 3, the owner


contributed $84,000 in assets to launch the business. On October 31, the company's records
show the following items and amounts. Use this information to prepare an October income
statement, statement of owner’s equity and an October 31 balance sheet for Ernst Consulting.

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