Sunday 20 May 2012

Problem 1-2A Computing missing information using accounting knowledge L.O. A1, P1 [The following information applies to the questions displayed below.] The following table contains financial information from 5 different companies:


Problem 1-2A Computing missing information using accounting knowledge L.O. A1, P1
[The following information applies to the questions displayed below.]
The following table contains financial information from 5 different companies:


Company
A
Company
B
Company
C
Company
D
Company
E
  December 31, 2010















      Assets
$
44,000  

$
34,320  

$
28,160  

$
78,320

$
120,120

      Liabilities

36,080  


24,024  


15,206  


54,040


?      

  December 31, 2011















      Assets

47,000  


33,840  


?      


85,540


129,720

      Liabilities

?      


23,011  


15,430  


41,059


102,478

  During year 2011















      Stock issuances

6,000  


1,400  


9,750  


?    


6,500

      Net income (loss)

10,730  


?      


(769) 


13,201


7,718

      Cash dividends

3,500  


2,000  


5,875  


0


11,000

Problem 1-2A Part 1
Required:
Answer the following questions about Company A (Omit the "$" sign in your response):

1a.
What is the amount of equity on December 31, 2010?

  Amount of equity
$ 7,920 correct  

1b.
What is the amount of equity on December 31, 2011?

  Amount of equity
$ 21,150 correct  

1c.
What is the amount of liabilities on December 31, 2011?

  Amount of liabilities 
$ 25,850 correct  
Explanation:
Company A: 
  





a.
  Equity on December 31, 2010:





  Assets
$
44,000



  Liabilities

(36,080
)

  










 Equity
$
7,920


   

















b.
 Equity on December 31, 2011:





 Equity, December 31, 2010
$
7,920



 Plus stock issuances

6,000



 Plus net income

10,730



 Less cash dividends

(3,500
)

  










 Equity, December 31, 2011
$
21,150


  

















c.
 Amount of liabilities on December 31, 2011:





 Assets
$
47,000



 Equity

(21,150
)

  










 Liabilities
$
25,850


Problem 1-2A Part 2
Answer the following questions about Company B (Omit the "$" sign in your response):

2a.
What is the amount of equity on December 31, 2010?

  Amount of equity
$ 10,296 correct  

2b.
What is the amount of equity on December 31, 2011?

  Amount of equity
$ 10,829 correct  

2c.
What is net income for year 2011?

  Net income
$ 1,133 correct  

 
Explanation:
Company B:

a. and b.

12/31/2010

12/31/2011

  Equity:




    Assets
$
34,320


$
33,840


    Liabilities

(24,024
)


(23,011
)

  














    Equity
$
10,296



10,829


  





























c.
  




  Net income for 2011:




    Equity, December 31, 2010
$
10,296


    Plus stock issuances

1,400


    Plus net income

   ?


    Less cash dividends

(2,000
)

  








    Equity, December 31, 2011
$
10,829


  


















  
Therefore, net income must have been   $ 1,133.
Problem 1-2A Part 3
3.
Calculate the amount of assets for Company C on December 31, 2011. (Omit the "$" sign in your response)

  Amount of Assets
$ 33,028 correct  
Explanation:
Company C:
First, calculate the beginning balance of equity:


Dec. 31, 2010
  Assets

$
28,160


  Liabilities


(15,206
)

  








  Equity

$
12,954


  

















Next, find the ending balance of equity as follows:

  




  Equity, December 31, 2010
$
12,954


  Plus stock issuances

9,750


  Plus net income

769


  Less cash dividends

(5,875
)

  







  Equity, December 31, 2011
$
17,598


  
















Finally, find the ending amount of assets by adding the ending balance of equity to the ending balance of liabilities:


Dec. 31, 2011
  Liabilities

$
15,430


  Equity


(17,598
)

  








  Assets

$
33,028


  
















Problem 1-2A Part 4
4.
Calculate the amount of stock issuances for Company D during year 2011. (Omit the "$" sign in your response):

 Amount of stock issuances
$ 7,000 correct  
Explanation:
Company D:
First, calculate the beginning and ending owner’s equity balances:


12/31/2010

12/31/2011

  Assets
$
78,320


$
85,540


  Liabilities

(54,040
)


(41,059
)

  














  Equity
$
24,280



44,481


  





























Then, find the amount of stock issuances during 2011:

  



  Equity, December 31, 2010
$
24,280

  Plus stock issuances

?

  Plus net income

13,201

  Less cash dividends

0

  





  Equity, December 31, 2011
$
44,481

  












Thus, stock issuances must have been: $ 7,000
Problem 1-2A Part 5
5.
Calculate the amount of liabilities for Company E on December 31, 2010. (Omit the "$" sign in your response):

  Amount of Liabilities
$ 96,096 correct  
Explanation:
Company E:
First, compute the balance of equity as of December 31, 2011:
 
  

  Assets

$
129,720


  Liabilities


(102,478
)

  








  Equity

$
27,242


  
















 
Next, find the beginning balance of equity as follows:

  




  Equity, December 31, 2010
$
?


  Plus stock issuances

6,500


  Plus net income

7,718


  Less cash dividends

(11,000
)

  







  Equity, December 31, 2011
$
27,242


  
















Thus, the beginning balance of equity was $24,024.

Finally, find the beginning amount of liabilities by subtracting the beginning balance of equity from the beginning balance of assets:


Dec. 31, 2010
  Assets

$
120,120


  Equity


(24,024
)

  








  Liabilities

$
96,096


  

















 

2 comments:

  1. Thanks, this was a big help :)

    ReplyDelete
  2. I would not understand why would you plus net income to find the new equity in problem 1b. Would you please explain that part? Big thanks :)

    ReplyDelete