Chapter 1: Q1DQ. (page 29)
Question: What is the purpose of accounting in society?
Accounting is the process of preparing and reporting financial information and it helps society by analyzing the business.
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Question: Identify four kinds of external users and describe how they use accounting information.
Ski-Doo Company manufactures, markets, and sells snowmobiles and snowmobile equipment and accessories. The average total assets for Ski-Doo is \(3,000,000. In its most recent year, Ski-Doo reported net income of \)201,000 on revenues of $1,400,000.
Required 4. What is the average total amount of liabilities plus equity for Ski-Doo Company?
Nina Niko launched a new business Niko’s Maintenance Co. that began operations on June 1. The following transactions were completed by the company during that first month.
June
1 Nina Niko invested \(130000 cash in the company in exchange for its common stock.
2 The company rented a furnished office and paid \)6000 cash for June’s rent.
4 The company purchased \(2400 of equipment on credit.
6 The company paid \)1150 cash for this month’s advertising of the opening of the business.
8 The company completed maintenance services for a customer and immediately collected \(850 cash.
14 The company completed \)7500 of maintenance services for City Center on credit.
16 The company paid \(800 cash for an assistant’s salary for the first half of the month.
20 The company received \)7500 cash payment for services completed for City Center on June 14.
21 The company completed \(7900 of maintenance services for Paula’s Beauty Shop on credit.
24 The company completed \)675 of maintenance services for Build-It Coop on credit.
25 The company received \(7900 cash payment from Paula’s Beauty Shop for the work completed on June 21.
26 The company made payment of \)2400 cash for equipment purchased on June 4.
28 The company paid \(800 cash for an assistant’s salary for the second half of this month.
29 The company paid \)4000 cash in dividends to the owner (sole shareholder).
30 The company paid \(150 cash for this month’s telephone bill.
30 The company paid \)890 cash for this month’s utilities.
Required 3. Prepare the statement of cash flows for the month of June
Use the information in Problem 1-3A to prepare a year-end statement of retained earnings for Armani Company.
Use the information in Exercise 1-15 to prepare an October 31 statement of cash flows for Ernst Consulting. Assume the following additional information.
a. The owner’s initial investment consists of \(38,000 cash and \)46,000 in land in exchange for its common stock.
b. The company’s \(18,000 equipment purchase is paid in cash.
c. The accounts payable balance of \)8,500 consists of the \(3,250 office supplies purchase and \)5,250 in employee salaries yet to be paid.
d. The company’s rent, telephone, and miscellaneous expenses are paid in cash.
e. No cash has been collected on the $14,000 consulting fees earned
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