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Home Work #2

Home Work #2. a. Unearned Revenue: Liability—balance sheet b. Salary Expense: Expense—income statement c. Prepaid Insurance: Asset—balance sheet d. Contributed capital: Owners’ equity—statement of changes in owners’ equity e. Distributions to Owners:

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Home Work #2

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  1. Home Work #2

  2. a. Unearned Revenue: Liability—balance sheet • b. Salary Expense: Expense—income statement • c. Prepaid Insurance: Asset—balance sheet • d. Contributed capital: Owners’ equity—statement of changes in owners’ equity • e. Distributions to Owners: Owners’ equity—statement of changes in owners’ equity

  3. f. Equipment: Asset—balance sheet • g. Sales revenue: Revenue—income statement • h. Cost of goods sold: Expense—income statement • i. Cash from investing activities: Asset—statement of cash flows • j. Depreciation Expense: Expense—income statement • k. Inventory: Asset—balance sheet

  4. a. Revenue – Expenses = Net Income $350 – Expenses = $110 Expenses = $240

  5. c. Liabilities + Contributed Capital + Retained Earnings = $600 $50 + Contributed Capital + $200 =$600 Contributed Capital=$350 d. Assets= Liabilities + Contributed Capital + Retained Earnings Assets= $60 + $350 + $140 Assets=$550

  6. P2-1B

  7. B. • 1. Details about the source and plans for the contributed capital • 2. Terms of the note • 3. Details about the vendor and any information used to make the rental decision • 4. The amount of water and electricity used and the effective rates • 5. Characteristics of the customers and the specific items sold • 6. Payroll details, including terms of employment • 7. Timing and decision criteria for distribution

  8. Sugar & Spice Pastry ShopIncome StatementFor the Month Ended May 31, 2002 Revenue Sales $5500 Expenses Equip. Rental Expense $ 2000 Utility Expense 850 Salary Expense 425 Interest expenses 503325 Net income $ 2175

  9. Sugar & Spice Pastry Shop • Income Statement • For the Month Ended May 31, 2002 Beginning contributed capital -0- Contributions during the year 7500 Ending contributed capital 7500 Beginning retained earning -0- Net Income for the year 2175 Dividends (560) Ending Retained earning $1,615 Total shareholder’s equity $9115

  10. Tom’s WearBalance SheetAs of 2/28/01 Assets Liabilities + Shareholder’s Equity Cash $15,165 Notes payable 6000 Interest Payables 50 Capital 7500 Retained earnings 1615 Total assets $ 15,165 Total liabilities + Equity $ 15,165

  11. Tom’s Wear, Inc.Statement of Cash FlowsFor the month ended 2/28/01 Cash from operating activities Cash from customers $ 5500 Cash paid for operating expense (3275) Total cash from operations $2225 Cash from investing activities -0- Cash from financing activities Cash from Owner’s Contribution 7500 Dividends (560) Borrowings 6000 Total Cash from Financing 12940 Net Increase in Cash $ 15165 Cash, Beginning Balance 0 Cash, ending Balance 15165

  12. Transactions for Green Emerald Magazine Co.: Adjustments and balances • a. Supplies are reduced by $425 and supplies expense for $425 is recorded. • b. Prepaid insurance would be $2,100 at December 31, 2008. Insurance expense would be $1,500 for the year ending December 31, 2008. • c. +6,100 – 400 = $5,700 cash from financing activities • d. $750 • e. $10,975 • f. $11,725

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