Chapter 1: Q13DQ. (page 29)
What does the concept of objectivity imply for the information reported in financial statements? Why?
Financial statements are written records that show financial positions and the concept of objectivity makes them more reliable and accurate.
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The following financial statement information is from five separate companies.
Company Company Company Company Company
V W X Y Z
December 31, 2016
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . \(54,000 \) 80,000 \(141,500 \)92,500 $144,000
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 60,000 68,500 51,500 ?
December 31, 2017
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,000 100,000 186,500 ? 170,000
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 36,000 ? 65,800 42,000 42,000
During year 2017
Stock issuances . . . . . . . . . . . . . . . . . . . 5,000 20,000 ? 48,100 60,000
Net income (or loss) . . . . . . . . . . . . . . . . ? 40,000 18,500 24,000 32,000
Cash dividends . . . . . . . . . . . . . . . . . . . 5,500 2,000 0 20,000 8,000
Required 2. Answer the following questions about Company W.
a. What is the amount of equity on December 31, 2016?
b. What is the amount of equity on December 31, 2017?
c. What is the amount of liabilities on December 31, 2017?
Key financial figures for Apple’s fiscal year ended September 26, 2015, follow.
Key Figure \( Millions
Liabilities + Equity . . . . . . . . . . . \)290,479
Net income . . . . . . . . . . . . . . . . . 53,394
Revenues . . . . . . . . . . . . . . . . . . 233,715
Required 1. What is the total amount of assets invested in Apple?
Identify how each of the following separate transactions 1 through 10 affects financial statements. For increases, place a “+” and the dollar amount in the column or columns. For decreases, place a “−” and the dollar amount in the column or columns. Some cells may contain both an increase (+) and a decrease (−) along with dollar amounts. The first transaction is completed as an example.
Required a. For the balance sheet, identify how each transaction affects total assets, total liabilities, and total equity. For the income statement, identify how each transaction affects net income
1 Owner invests \(800 cash in business in exchange for stock +800 +800 +800
2 Purchases \)100 of supplies on credit
3 Buys equipment for \(400 cash
4 Provides services for \)900 cash
5 Pays \(400 cash for rent incurred
6 Incurs \)200 utilities costs on credit
7 Pays \(300 cash for wages incurred
8 Pays \)50 cash for dividends
9 Provides \(600 services on credit
10 Collects \)600 cash on accounts receivable
What do accountants mean by the term revenue?
Gabi Gram started The Gram Co., a new business that began operations on May 1. The Gram Co. completed the following transactions during its first month of operations.
May 1 G. Gram invested \(40,000 cash in the company in exchange for its common stock.
1 The company rented a furnished office and paid \)2,200 cash for May’s rent.
3 The company purchased \(1,890 of office equipment on credit.
5 The company paid \)750 cash for this month’s cleaning services.
8 The company provided consulting services for a client and immediately collected \(5,400 cash.
12 The company provided \)2,500 of consulting services for a client on credit.
15 The company paid \(750 cash for an assistant’s salary for the first half of this month.
20 The company received \)2,500 cash payment for the services provided on May 12.
22 The company provided \(3,200 of consulting services on credit.
25 The company received \)3,200 cash payment for the services provided on May 22.
26 The company paid \(1,890 cash for the office equipment purchased on May 3.
27 The company purchased \)80 of advertising in this month’s (May) local paper on credit; cash payment is due June 1.
28 The company paid \(750 cash for an assistant’s salary for the second half of this month.
30 The company paid \)300 cash for this month’s telephone bill.
30 The company paid \(280 cash for this month’s utilities.
31 The company paid \)1,400 cash in dividends to the owner (sole shareholder).
Required 1. Create the following table similar to the one in Exhibit 1.9.
Enter the effects of each transaction on the accounts of the accounting equation by recording dollar increases 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
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