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Chapter 1: Q11RQ. (page 32)
Financial statements in the United States are reported in U.S. dollars. What assumption supports this statement?
Monetary Unit Assumption supports this statement.
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Exeter is a building contractor on the Gulf Coast. After losing a number of big lawsuits, it was facing its first annual net loss as the end of the year approached. The owner, Hank Snow, was under intense pressure from the company鈥檚 creditors to report positive net income for the year. However, he knew that the controller, Alice Li, had arranged a short-term bank loan of $10,000 to cover a temporary shortfall of cash. He told Li to record the incoming cash as 鈥渃onstruction revenue鈥� instead of a loan. That would nudge the company鈥檚 income into positive territory for the year, and then, he said, the entry could be corrected in January when the loan was repaid. Requirements 1. How would this action affect the year-end income statement? How would it affect the year-end balance sheet? 2. If you were one of the company鈥檚 creditors, how would this fraudulent action affect you?
Identifying accounts on the financial statements Consider the following accounts: a. Accounts Payable b. Cash c. Common Stock d. Accounts Receivable e. Rent Expense f. Service Revenue g. Office Supplies h. Dividends i. Land j. Salaries Expense Identify the financial statement (or statements) that each account would appear on. Use I for Income Statement, RE for Statement of Retained Earnings, B for Balance Sheet, and C for Statement of Cash Flows.
Amos Sharp recently opened his own accounting firm on October 1, which he operates as a corporation. The name of the new entity is Amos Sharp, CPA. Sharp experienced the following events during the organizing phase of the new business and its first month of operations in 2018. Oct. 5 Sharp deposited \(45,000 in a new business bank account titled Amos Sharp, CPA. The business issued common stock to Sharp. 6 Paid \)300 cash for letterhead stationery for new office. 7 Purchased office furniture for the office on account, \(6,500. 10 Consulted with tax client and received \)3,300 for services rendered. 11 Paid utilities, \(340. 12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, \)16,000. 18 Paid office rent, \(1,800. 25 Received amount due from client that was billed on October 12. 27 Paid full amount of Accounts Payable created on October 7. 31 Cash dividends of \)3,800 were paid to stockholders. Requirements 1. Analyze the effects of the events on the accounting equation of Amos Sharp, CPA. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet.
Requirements 1. Prepare the income statement for Wilson Towing Service for the month ending June 30, 2018. 2. What does the income statement report?
Polk Street Homes had the following cash transactions for the month ended July 31, 2018.
Cash receipts:
Collections from customers $ 25,000
Issued common stock 13,000
Cash payments:
Rent 500
Utilities 2,000
Salaries 1,500
Purchase of equipment 25,000
Payment of cash dividends 4,000
Cash balance, July 1, 2018 14,000
Cash balance, July 31, 2018 19,000
Prepare the statement of cash flows for Polk Street Homes for the month ended
July 31, 2018.
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