Week 1 Problem SetsPart 1•Exercise 1-9A on page 40Exercise 1-9A Components of the accounting equationJones Enterprises was started when it acquired $6 000 cash from creditors and $10 000 fromowners. The company immediately purchased land that cost $12 000.Requireda. Record the events under an accounting equation.b. After all events have been recorded Jones’s obligations to creditors represent what percent oftotal assets?c. After all events have been recorded Jones’s stockholders’ equity represents what percent oftotal assets?d. Assume the debt is due. Given that Jones has $10 000 in stockholders’ equity can the company repay the creditors at this point? Why or why not?•Exercise 1-10A on page 40Exercise 1-10A Components of the accounting equationCommon RetainedAssets 5 Liabilities 1 Stock 1 EarningsAllen $10 000 5 $7 500 1 $2 000 1 $ 500White $12 000 5 $3 000 1 $7 200 1 $1 800Requireda. Based on this information alone can you determine whether White can pay a $2 000 cashdividend? Why or why not?b. Reconstruct the accounting equation for each company using percentages on the right sideof the equation instead of dollar values. Which company is more financially stable? Why?c. Assume Allen incurs a $3 500 operating loss. The remaining assets are sold for the valueshown on the books and the cash proceeds are distributed to the creditors and investors.How much money will be paid to creditors and how much will be paid to investors?d. Assume White incurs a $3 500 operating loss. The remaining assets are sold for the valueshown on the books and the cash proceeds are distributed to the creditors and investors.How much money will be paid to creditors and how much will be paid to investors?•Exercise 1-4A on page 38Exercise 1-4A Missing information in the accounting equationRequiredCalculate the missing amounts in the following table.Stockholders’ EquityCompany RetainedCompany Assets 5 Liabilities 1 Stock 1 Ear n ingsA $ ? $25 000 48 000 $50 000B 40 000 ? 7 000 30 000C 75 000 15 000 ? 42 000D 125 000 45 000 60 000 ?•Exercise 1-7A on page 39Exercise 1-7A Missing information and recording eventsAs of December 31 2016 Moss Company had total cash of $195 000 notes payable of $90 500 and common stock of $84 500. During 2017 Moss earned $42 000 of cash revenue paid $24 000for cash expenses and paid a $3 000 cash dividend to the stockholders.Requireda. Determine the amount of retained earnings as of December 31 2016.b. Create an accounting equation and record the beginning account balances under the appropriate elements.c. Record the revenue expense and dividend events under the appropriate elements of the accounting equation created in Requirement b .d. Prove the equality of the accounting equation as of December 31 2017.e. Identify the beginning and ending balances in the Cash and Common Stock accounts. Explain why the beginning and ending balances in the Cash account are different but the beginning and ending balances in the Common Stock account remain the same.•Exercise 1-6A on page 39Exercise 1-6A E f fect of transactions on general ledger accountsAt the beginning of 2016 Better Corp.’s accounting records had the following general ledger accounts and balances.BETTER CORP.Accounting EquationAcct. TitlesEvent Assets 5 Liabilities 1 Stockholders’ Equity for RENotes Common RetainedCash Land Payable Stock EarningsBalance1/1/2016 10 000 20 000 12 000 7 000 11 000Better Corp. completed the following transactions during 2016:1. Purchased land for $5 000 cash.2. Acquired $25 000 cash from the issue of common stock.3. Received $75 000 cash for providing services to customers.4. Paid cash operating expenses of $42 000.5. Borrowed $10 000 cash from the bank.6. Paid a $5 000 cash dividend to the stockholders.7. Determined that the market value of the land purchased in event 1 is $35 000.Requireda. Record the transactions in the appropriate general ledger accounts. Record the amounts ofrevenue expense and dividends in the Retained Earnings column. Provide the appropriatetitles for these accounts in the last column of the table.b. As of December 31 2016 determine the total amount of assets liabilities and stockholders’equity and present this information in the form of an accounting equation.c. What is the amount of total assets liabilities and stockholders’ equity as of January 1 2017?•Exercise 1-8A on page 39Exercise 1-8A Account titles and the accounting equationThe following account titles were drawn from the general ledger of Holt Food Supplies Incorporated (HFSI): Computers Operating Expenses Rent Revenue Building Cash Notes Payable Land Utilities Payable Utilities Expense Trucks Gasoline Expense Retained Earnings Supplies Accounts Payable Office Furniture Salaries Expense Common Stock Service Revenue Interest Expense Dividends Supplies Expense.Requireda. Create an accounting equation using the elements assets liabilities and stockholders’ equity.List each account title under the element of the accounting equation to which it belongs.b. Will all businesses have the same number of accounts? Explain your answer.Part 2•Question 1: What is the accounting equation? Why is this important to the practice of accounting? Please provide an example of how the accounting equation works with recording transactions within a business.•Question 2: Is there a difference between bookkeeping and accounting? Discuss.•Question 3: Accounting reports past performance. How can this be useful when planning future operations?
