GB 518 UNIT 01
P1-1A P1-8A P2-3A
1 Owner invests cash in exchange for stock
2 Incurs legal costs on credit
3 Pays cash for employee wages
4 Borrows cash by signing long-term note payable
5 Receives cash for services provided
6 Buys land by signing note payable
7 Buys office equipment for cash
8 Provides services on credit
9 Collects cash on receivable from transaction (8)
10 Owner withdraws cash
P1-8A J. D. Simpson started The Simpson Co., a new business that began operations on May 1. The Simpson Co. completed the following transactions during its first month of operations. May 1 J. D.Simpson invested $60,000 cash in the company in exchange for common stock.
1 The company rented a furnished office and paid $3,200 cash for May’s rent.
3 The company purchased $1,680 of office equipment on credit.
5 The company paid $800 cash for this month’s cleaning services.
8 The company provided consulting services for a client and immediately collected $4,600 cash.
12 The company provided $3,000 of consulting services for a client on credit.
15 The company paid $850 cash for an assistant’s salary for the first half of this month.
20 The company received $3,000 cash payment for the services provided on May 12.
22 The company provided $2,800 of consulting services on credit.
25 The company received $2,800 cash payment for the services provided on May 22.
26 The company paid $1,680 cash for the office equipment purchased on May 3.
27 The company purchased $60 of advertising in this month’s (May) local paper on credit; cash payment is due June 1.
28 The company paid $850 cash for an assistant’s salary for the second half of this month.
30 The company paid $200 cash for this month’s telephone bill.
30 The company paid $480 cash for this month’s utilities.
31 The company paid $1,200 cash for dividends.
Required
1. Arrange the following asset, liability, and equity titles in a table like Exhibit 1.9: Cash; Accounts Receivable; Office Equipment; Accounts Payable; Common Stock; Dividends; Revenues; and Expenses.
2. Show effects of the transactions on the accounts of the accounting equation by recording increase and decreases in the appropriate columns. Do not determine new account balances after each transaction. Determine the final total for each account and verify that the equation is in balance.
3. Prepare an income statement for May, a statement of retained earnings for May, a May 31 balance sheet, and a statement of cash flows for May.
P2-3A The accounting records of Fabiano Distribution show the following assets and liabilities as of December 31 2010 2011
Cash . . . . . . . . . . . . . . . . . . . . $ 52,500 $ 18,750
Accounts receivable . . . . . . . . 28,500 22,350
Office supplies . . . . . . . . . . . . . 4,500 3,300
Office equipment . . . . . . . . . . 138,000 147,000
Trucks . . . . . . . . . . . . . . . . . . . 54,000 54,000
Building . . . . . . . . . . . . . . . . . . 0 180,000
Land . . . . . . . . . . . . . . . . . . . . . 0 45,000
Accounts payable . . . . . . . . . . 7,500 37,500
Note payable . . . . . . . . . . . . . . 0 105,000
Late in December 2011, the business purchased a small office building and land for $225,000. It paid $120,000 cash toward the purchase and a $105,000 note payable was signed for the balance. Mr. Fabiano had to invest $35,000 cash in the business (in exchange for stock) to enable it to pay the $120,000 cash. The business also pays $3,000 cash per month for dividends.
Required
2. By comparing equity amounts from the balance sheets and using the additional information presented in this problem, prepare a calculation to show how much net income was earned by the business during 2011.
3. Compute the 2011 year-end debt ratio for the business
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