Basic Accounting

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Week One Exercise Assignment
Basic Accounting Equations

1.Concepts. Jean's Marine Supply specializes in the sale of boating equipment and acces¬sories. Identify the Basic items that follow as an asset (A), liability (L), revenue (R), or expense (E) from the firm's viewpoint.

a. The inventory of boating supplies owned by the company. – Asset (A) b. Monthly rental charges paid for store space. – Expense (E) c. A loan owed to Citizens Bank. – Liability (L)
d. New computer equipment purchased to handle daily record keeping. – Asset (A) e.Daily sales made to customers. – Revenue (R)
f. Amounts due from customers. – Asset (A)
g. Land owned by the company to be used as a future store site. – Asset (A) h. Weekly salaries paid to salespeople. – Expense (E)

2.Basic computations. The following selected balances were extracted from the accounting records of Rossi Enterprises on December 31, 20X3:

Accounts Payable $3,200 Interest Expense $2,500
Accounts Receivable 14,800 Land 18,000
Auto Expense 1,900 Loan Payable 40,000
Building 30,000 Tax Expense 3,300
Cash 7,400 Utilities Expense 4,100
Fee Revenue 56,900 Wage Expense 37,500

a.Determine Rossi’s total assets as of December 31.
b.Determine the company’s total liabilities as of December 31. 3200+1900+2500+40000+3300+4100+37500=$92500
c.Compute 20X3 net income or loss.
$34600 income

3. Balance sheet preparation. The following data relate to Preston Company as of December 31, 19XX:

Building$44,000Accounts receivable$24,000
Cash17,000Loan payable30,000
J. Preston, Owners Equity65,000Land21,000
Accounts payable?

Prepare a balance sheet as of December 31, 19XX. (See Exhibit 1.1 and 1.4) Assets
Cash $17000
Accounts Receivable $24000
Building $44000
Land $21000
Total $106000
Liabilities and Owners equity
Loan $30000
Accounts payable?
Owner Equity 65000
Total $95000
(Accounts payable should be $11000 to balance equation?)

4. Basic transaction processing. On November 1 of the current year, Richard Parker established a sole proprietorship. The following transactions occurred during the month:

1: Parker invested $19,000 into the business.
2: Paid $9,000 to acquire a used minivan.
3: Purchased $1,800 of office furniture on account.
4: Performed $2,100 of consulting services on account.
5: Paid $300 of repair expenses.
6: Received $800 from clients who were previously billed in item 4. 7: Paid $500 on account to the supplier of office furniture in item 3. 8: Received a $150 electric bill, to be paid next month.

9: Parker withdrew $600 from the business.
10: Received $250 in cash from clients for consulting services rendered.

a.Arrange the following asset, liability, and owner’s equity elements of the account¬ing equation: Cash, Accounts Receivable, Office Furniture, Van, Accounts Payable, Investments/Withdrawals, and Revenues/Expenses. (See Exhibit 5) Assets

Cash $250
Accounts Receivable
Total $106000
Liabilities and Owners equity
Accounts payable?
Owner Equity
b. Record each transaction on a separate line. After all transactions have been recorded, compute the balance in each of the preceding items. c. Answer the following questions for Parker.
(1) How much does the company owe to its creditors at month-end? On which financial statement(s) would this information be found? Furniture (1800-500)1300+Expenses (300+150)450=1750 (2) Did the company have a “good” month from an accounting viewpoint? Briefly explain. I would have to say no. The cash coming in vs. the cash out is near doubled. Cash on hand decreased by 2350 while cash actually received was 1300. On the other hand, considering the increase of asset value...
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