Solution to Practice Session 2 - April 2015

Solution to practice question 1

Here Comes the TigersBalance Sheet

30-Jun-12

Assets

Cash $24,450.00Accounts receivable $22,000.00notes receivables $8,200.00Costumes $17,000.00Props and equipment $92,000.00Animals $200,000.00Cages $20,000.00Tents $43,000.00Trucks and wagons $110,240.00

$536,890.00

Here Comes the TigersBalance Sheet

30-Jun-12

Liabilities and Owners' EquityLiabilities Accounts payable $4,100.00Salaries payable $8,090.00notes payable $120,000.00

$132,190.00Owners' equity

Capital Stock $350,000.00Retained Earning $54,700.00

$404,700.00$536,890.00

Solution to practice question 2

The Town BakeryBalance Sheet

1-Aug-02

Assets Liabilities and Owners' EquityLiabilities

Cash $3,200.00 Accounts payableAccounts receivable $10,100.00 Salaries payableSupplies $6,200.00 notes payableEquipment $22,000.00Building $80,000.00 Owners' equityLand $40,000.00

Capital StockRetained Earning

$161,500.00

Aug-02 Cash will increase by $ 20,000 and also Capital Stock will increase by the same amount.Cash balance will become $23,200 from which $6,300 will be paid for accounts payable.

Aug-03 Equipment and Accounts payable will increase by $5,000. Supplies will increase by $1,100and Cash will decrease by the same amount.


3-Aug-02


Cash $15,800.00 Accounts payableAccounts receivable $10,100.00 Salaries payableSupplies $7,300.00 notes payableEquipment $27,000.00Building $80,000.00 Owners' equityLand $40,000.00

Capital StockRetained Earning

$180,200.00


1-Aug-02

Liabilities and Owners' Equity

$6,300.00$4,200.00

$50,000.00$60,500.00

$90,000.00$11,000.00

$101,000.00$161,500.00

Cash will increase by $ 20,000 and also Capital Stock will increase by the same amount.Cash balance will become $23,200 from which $6,300 will be paid for accounts payable.

Equipment and Accounts payable will increase by $5,000. Supplies will increase by $1,100


3-Aug-02


$5,000.00$4,200.00

$50,000.00$59,200.00

$110,000.00$11,000.00

$121,000.00$180,200.00

The Town Bakery

Statement of Cash Flows

For the period 01 to 03 August 2002

Cash Flows from Operating Activities

Cash payment for Supplies $ (1,100)

Cash Payments for accounts payable (6,300)

Net Cash Flow from Operating Activities

Cash Flows for Investing Activities

Net cash Flow from Investing Activities

Cash Flows from Financing Activities

Cash Receipts from Borrowing Funds -

Cash Receipts from Issuing Common Stock 20,000

Cash Payments for Dividends -

Net Cash Flow from Financing Activities

Net Increase in Cash

Plus Beginning Cash Balance

Ending Cash Balance

The Town Bakery


For the period 01 to 03 August 2002

$ (7,400)

-

20,000

12,600

3,200.00

$ 15,800

Practice question 3

New City PlayhouseBalance Sheet

As on 30 September 2002


Cash $18,200.00 Accounts payableAccounts receivable $140,100.00 Salaries payableProps and constumes $2,000.00 notes payableTheater Building $27,000.00Lighting equipment $9,100.00 Owners' equityAutomobile $16,000.00

Capital Stock

$212,400.00

Practice question 3

New City Playhouse



Cash $17,100.00 Accounts payableAccounts receivable $8,000.00 Salaries payableProps and constumes $19,000.00 notes payable

Lighting equipment $9,100.00 Owners' equity

Capital Stock

$53,200.00

1 Personal cash of the owner will not be reported in the business balance sheet - Entity Concept2 Accounts receivables are claims for the sales already made. 3 Under Accrual basis of Accounting transactions are recorded irrespective of whether cash is paid or received.4 The building is a rented property, not something under the full control or ownership of the business,

(Corrected) Balance Sheet

so it cannot be classified as an asset of the business. 5 The equipment has to be reported at its original cost6 the automobile is a personal property not owned by the business, so will not be reported on balance sheet - Business Entity concept7 Personal liabilities will not be included - Business Entity concept.8 Salary expense as payable will only be recognised for the expenses actually incurred during the period - Matching principle9 Common Stock or Share Capital has to be reported at the amount actually invested by the Owners.

New City PlayhouseBalance Sheet



$5,000.00$31,200.00

$0.00$36,200.00

$176,200.00$176,200.00

$212,400.00

New City Playhouse



$4,000.00$3,200.00

$16,000.00$23,200.00

$30,000.00$30,000.00

$53,200.00

Personal cash of the owner will not be reported in the business balance sheet - Entity Concept

Under Accrual basis of Accounting transactions are recorded irrespective of whether cash is paid or received.The building is a rented property, not something under the full control or ownership of the business,

Balance Sheet

the automobile is a personal property not owned by the business, so will not be reported on balance sheet - Business Entity concept

Salary expense as payable will only be recognised for the expenses actually incurred during the period - Matching principleCommon Stock or Share Capital has to be reported at the amount actually invested by the Owners.

Practice question 4

Revenue

Aug-01Aug-04Aug-09Aug-16Aug-21Aug-24 $2,500.0Aug-27Aug-28Aug-31

$2,500.0

Dr. Dentist

Income Statement

For the Month Ended August 31, 2014

Service revenue

Operating Expenses

Advertising expense -500Salary expense -2700

Net Income / (Loss)

Dr. Dentist

Statement of changes in Equity

For the month Ended August 31, 2014

Beginning Common Stock $ -

Plus: Investment by shareholders 250,000

Ending Common Stock

Beginning Retained Earnings $ -

Less: net loss (700)

Ending Retained Earnings

Total Stockholders' Equity

Dr. Dentist



Cash Flows from Operating Activities

Cash received from service revenue $ 1,200

Cash collected from accounts receivable $ 400

Cash Payments for Salary Expenses (2,700)

Net Cash Flow from Operating Activities

Cash Flows for Investing Activities

Cash Payments to Purchase Land and Building (100,000)

Cash payments to purchase medical instruments (62,000)

Cash payments to purchase office equipment (5,000)

Cash payments to purchase Supplies (3,500)

Net Cash Flow from Investing Activities

Cash Flows from Financing Activities

Cash Receipts from Issuing Common Stock 250,000

Net Cash Flow from Financing Activities

Net Increase in Cash

Plus Beginning Cash Balance

Ending Cash Balance

Dr. Dentist

Balance Sheet

As of August 31, 2014

Assets

Cash $ 78,400

Accounts receivable $ 900

Office Supplies $ 3,500

Office Equipment $ 30,000

Medical Instruments $ 62,000

Building $ 235,000

Land 85,000

Total Assets

Liabilities

Accounts Payable $ 25,500

Notes Payable $ 220,000

Stockholders' Equity

Commn Stock $ 250,000

Retained Earnings (700)

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

Expense Net income Asset Cash Accounts receivable

$250,000.0-$100,000.0

-$62,000.0-$5,000.0-$3,500.0$1,200.0 $1,300.0

$500.0$400.0 -$400.0

$2,700.0 -$2,700.0$3,200.0 -$700.0 $78,400.0 $900.0

Total Assets=

Dr. Dentist

Income Statement


$ 2,500

(3,200)

$ (700)

Dr. Dentist

Statement of changes in Equity

For the month Ended August 31, 2014

$ 250,000

(700)

$ 249,300

Dr. Dentist



$ (1,100)

(170,500)

250,000

78,400

-

$ 78,400

Dr. Dentist

Balance Sheet

As of August 31, 2014

$ 494,800

245,500.00

249,300

$ 494,800

Asset Land Building Medical Ins Office Equip Office Supplies

$85,000.0 $235,000.0$62,000.0

$30,000.0$3,500.0

$85,000.0 $235,000.0 $62,000.0 $30,000.0 $3,500.0

Total Liabilities$494,800.0

Liabilities Owners' EquityNotes payable Accounts Payable Share captial Retained Earning

$250,000.0$220,000.0

$25,000.0

$500.0

$220,000.0 $25,500.0 $250,000.0 -$700.0

$245,500.0 Total Equity= $249,300.0$494,800.0

Documents

Solution to Practice Session 2 - April 2015