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Chapter 1

The document contains exercises related to accounting principles, including true/false statements about GAAP, identification of assets and liabilities, and calculations involving the basic accounting equation. It also includes tasks for preparing income statements, owner's equity statements, and balance sheets based on provided financial data. Additionally, it requires analysis of changes in owner's equity to compute net income or loss for specific years.

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7 views5 pages

Chapter 1

The document contains exercises related to accounting principles, including true/false statements about GAAP, identification of assets and liabilities, and calculations involving the basic accounting equation. It also includes tasks for preparing income statements, owner's equity statements, and balance sheets based on provided financial data. Additionally, it requires analysis of changes in owner's equity to compute net income or loss for specific years.

Uploaded by

omarzedan9999
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Chapter (1) Accounting in Action

Exercises
Question (1):

- State whether the following statements are true or false with a


suitable comment:
1) GAAP stands for Generally Accepted Auditing Principles
2) The monetary unit assumption requires that the activities of an
entity be kept separate and distinct from the activities of its
owner and all other economic entities.
3) Net income for the period is determined by subtracting total
expenses and drawings from total revenues
4) Management of a business enterprise is the major external
user of information
5) Financial statements are the major means of communicating
accounting information to interested parties.

Question (2):

- Indicate whether each of the following items is an asset (A),


liability (L), or part of owner’s equity (OE):
a) Accounts receivables
b) Salaries and wages payable
c) Equipment
d) Supplies
e) Owner’s capital
f) Notes payable
Question (3):

- Presented below is the basic accounting equation determine the


missing amounts.
Assets = Liabilities + Owner’s Equity
a) $90,000 $50,000 ?
b) ? $40,000 $70,000
c) $94,000 ? $53,000

Question (4):

- Use the expanded accounting equation to answer each of the


following questions:
a) The liabilities of Falk Company are $ 90,000. Owner’s capital
account is $150,000; drawings are $40,000; revenues $450,000
and expenses $320,000. What is the amount of Falk Company’s
total assets?
b) The total assets of Pierogi Company are $57,000. Owner’s
capital account is $25,000 drawings are $7,000 revenues
$52,000 and expenses $35,000. What is the amount of the
company’s total liabilities?
Question (5):

- Indicate whether each of the following items is an asset (A),


liability (L), or part of owner’s equity (OE):
(a) Accounts receivables
(b) Salaries and wages payable
(c) Equipment
(d) Supplies
(e)Owner’s capital
(f) Notes payable

Question (6):

- The following information relates to Jake Peavy Co. for the year
2012:
Owner's capital, January 1, 2012 $ 48,000
Advertising expense $1,800
Owner's drawings during 2012 6,000
Rent expense 10,400
Service revenue 63,600
Utilities expense 3,100
Salaries and wages expense 29,500
Instructions: 18 After analyzing the data, prepare an income
statement and an owner's equity statement for the year ending
December 31, 2012?
Question (7):

- On May Ahmed Started his business by investing $40,000 cash.


Following are the information relates to Ahmed Co. for May 2012:
Cash $ 3,400
Notes Payable $30,000
Accounts Receivable 4,900
Rent expense 1,200
Equipment 64,000
Maintenance expense 400
Service revenue 8,100
Gasoline Exp. 2,500
Advertising expense 600
Insurance Exp. 400
Accounts Payable 800
Ahmed withdrew $1,500 in cash.

- Instructions: Prepare an income statement and an owner's equity


statement for the month of May and a balance sheet at May 31.
Question (8):

- The Corner Stone Company had the following assets and liabilities
on the dates indicated.
December 31 Total Assets Total Liabilities
2016 $480,000 $250,000
2017 $460,000 $220,000
2018 $590,000 $300,000
Corner Stone began business on January 1, 2016, with an
investment of $100,000.

Instructions: From an analysis of the change in owner’s equity


during the year, compute the net income (or loss) for:

(A) 2016, assuming Corner Stone owner’s drawings were


$45,000 for the year.
(B) 2017, assuming Corner Stone owner made an additional
investment of $50,000 and had no drawings in 2017.
(C) 2018, assuming Corner Stone owner made an additional
investment of $15,000 and had drawings of $40,000 in 2018.

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