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Chapter 1: Q16RQ. (page 32)
What are the steps used when analyzing a business transaction?
The steps in analyzing a business transaction are as follows:
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Indicate the effects of the following business transactions on the accounting equation for Sam鈥檚 Snack Foods, a supplier of snack foods. Transaction (a) is answered as a guide. a. Sam鈥檚 Snack Foods received cash from issuance of common stock to stockholders. Answer: Increase asset (Cash); Increase equity (Common Stock) b. Cash purchase of land for a building site. c. Paid cash on accounts payable. d. Purchased equipment; signed a note payable. e. Performed service for a customer on account. f. Employees worked for the week but will be paid next Tuesday. g. Received cash from a customer on accounts receivable. h. Borrowed money from the bank. i. Cash dividends paid to stockholders. j. Incurred utilities expense on account.
Elaine鈥檚 Inflatables earns service revenue by providing party planning services and inflatable playscapes. Elaine鈥檚 Inflatables is organized as a corporation. During the past month, Elaine鈥檚 Inflatables had the following transactions:
a. Received contributions of \(10,000 in exchange for common stock.
b. Purchased equipment for \)5,000 on account
c. Paid \(400 for office supplies.
d. Earned and received \)2,500 cash for service revenue.
e. Paid \(400 for wages to employees.
f. Cash dividends of \)1,000 were paid to stockholders.
g. Earned \(1,000 for services provided. Customer has not yet paid.
h. Paid \)1,000 for rent.
i. Received a bill for $250 for the monthly utilities. The bill has not yet been paid.
Indicate the effects of the business transactions on the accounting equation for
Elaine鈥檚 Inflatables. Transaction (a) is answered as a guide.
a. Increase asset (Cash); Increase equity (Common Stock)
Explain the role of the International Accounting Standards Board (IASB) in relation to International Financial Reporting Standards (IFRS).
Pretty Pictures works weddings and prom-type parties. The balance of Retained Earnings was \(20,000 at December 31, 2017. At December 31, 2018, the business鈥檚 accounting records show these balances: Insurance Expense \) 6,000 Accounts Receivable $ 5,000 Cash 42,000 Notes Payable 10,000 Accounts Payable 13,000 Retained Earnings, Dec. 31, 2018 ? Advertising Expense 4,500 Salaries Expense 30,000 Service Revenue 115,000 Equipment 85,500 Dividends 13,000 Common Stock 28,000 Prepare the following financial statements for Pretty Pictures for the year ended December 31, 2018: a. Income statement. b. Statement of retained earnings. c. Balance sheet
Identifying users of accounting information For each user of accounting information, identify if the user would use financial accounting or managerial accounting. a. investor e. controller b. banker f. stockholder c. IRS g. human resources director d. manager of the business h. creditor
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