Accounting Texts and Casts Problems 1-4, 1-5

Topics: Generally Accepted Accounting Principles, Balance sheet, Accounts receivable Pages: 4 (679 words) Published: June 5, 2012
Problem 1-4
The explanation of these 11 transactions is:
1.Owners invest $20,000 of equity capital in Acme Consulting. 2.Equipment costing $7,000 is purchased for $5,000 cash and an account payable of $2,000. 3.Supplies inventory costing $1,000 is bought for cash.

4.Salaries of $4,500 are paid in cash.
5.Revenues of $10,000 are earned, of which $5,000 has been recovered in cash. The remaining $5,000 is owed to the company by its customers. 6.Accounts payable of $1,500 are paid in cash.
7.Customers pay $1,000 of the $5,000 they owe the company.
8.Rent Expense of $750 is paid in cash.
9.Utilities of $500 are paid in cash.
10.A $200 travel expense has been incurred but not yet paid. 11.Supplies inventory costing $200 are consumed.
ACME CONSULTING
BALANCE SHEET AS OF JULY 31, ----.
AssetsLiabilities and Owners’ Equity
Cash$12,750Accounts payable$ 700
Accounts receivable4,000
Supplies inventory 800______
Current assets17,550Current liabilities700
Equipment 7,000Owners’ equity 23,850

Total assets
$24,550Total liabilities
and owners’ equity
$24,550

ACME CONSULTING
INCOME STATEMENT JULY 1 - 31, ----.
Revenues$10,000
Expenses
Salaries4,500
Rent750
Utilities500
Travel200
Supplies 2006,150
Net income$ 3,850

ACME CONSULTING
CASH RECEIPTS AND DISBURSEMENTS, JULY 1 - 31, ----.
Receipts
Owners’ investment$20,000
Cash sales5,000
Collection of accounts receivable 1,000
Total receipts$26,000
Disbursements
Equipment purchase$5,000
Supplies purchase 1,000
Salaries paid4,500
Payments to vendors1,500
Rent paid750
Utilities paid 500
Total disbursements$13,250
Increase in cash$12,750

The change in this cash account includes the owners’ investment, which is not an income statement item. The income statement includes revenues and expenses that have not yet been received in cash or paid in...
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