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Chapter 1: Q21E_e (page 37)

Question: Match each transaction a through e to one of the following activities of an organization: financing activity (F), investing activity (I), or operating activity (O).

e. An organization purchases equipment.

Short Answer

Expert verified

Asset helps the organization to generate some revenue in the future and the purchase of assets will come under investing activities.

Step by step solution

01

Step-by-Step SolutionStep 1 Definition of Asset

The assets are the economic resources owned by the businesses which help to generate some revenue.

02

Choosing the correct activity

The equipment purchased by the organization will come under the investing activities as there is a purchase of a fixed asset which is considered as the investing activity.

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Most popular questions from this chapter

Following is selected financial information of Kia Company for the year ended December 31, 2017.

Cash used by investing activities . . . . . . . . . . . . . . . . . $(2,000)

Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200

Cash used by financing activities . . . . . . . . . . . . . . . . (2,800)

Cash from operating activities . . . . . . . . . . . . . . . . . . . 6,000

Cash, December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . 2,300

Required Prepare the 2017 year-end statement of cash flows for Kia Company

Sanyu Sony started a new business and completed these transactions during December.

Dec. 1 Sanyu Sony transferred \(65000 cash from a personal savings account to a checking account in the name of Sony Electric in exchange for its common stock.

2 The company rented office space and paid \)1000 cash for the December rent.

3 The company purchased \(13000 of electrical equipment by paying \)4800 cash and agreeing to pay the \(8200 balance in 30 days.

5 The company purchased office supplies by paying \)800 cash.

6 The company completed electrical work and immediately collected \(1200 cash for these services.

8 The company purchased \)2530 of office equipment on credit.

15 The company completed electrical work on credit in the amount of \(5000.

18 The company purchased \)350 of office supplies on credit.

20 The company paid \(2530 cash for the office equipment purchased on December 8.

24 The company billed a client \)900 for electrical work completed; the balance is due in 30 days.

28 The company received \(5000 cash for the work completed on December 15.

29 The company paid the assistant’s salary of \)1400 cash for this month.

30 The company paid \(540 cash for this month’s utility bill.

31 The company paid \)950 cash in dividends to the owner (sole shareholder).

Required 1. Create the following table similar to the one in Exhibit 1.9

As of December 31, 2017, Armani Company’s financial records show the following items and amounts.

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,000

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000

Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000

Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000

Retained earnings, Dec. 31, 2016 . . . . . . . . . . . . . . . . 4,000

Retained earnings, Dec. 31, 2017 . . . . . . . . . . . . . . . . 6,000

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,000

Consulting revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,000

Rental revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000

Salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000

Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000

Selling and administrative expenses . . . . . . . . . . . . . . 8,000

Required Prepare the 2017 year-end income statement for Armani 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 2. Prepare the income statement and the statement of retained earnings for the month of June, and the balance sheet as of June 30.

Rivera Roofing Company, owned by Reyna Rivera, began operations in July and completed these transactions during that first month of operations.

July 1 Reyna Rivera invested \(80,000 cash in the company in exchange for its common stock.

2 The company rented office space and paid \)700 cash for the July rent.

3 The company purchased roofing equipment for \(5,000 by paying \)1,000 cash and agreeing to pay the \(4,000 balance in 30 days.

6 The company purchased office supplies for \)600 cash.

8 The company completed work for a customer and immediately collected \(7,600 cash for the work.

10 The company purchased \)2,300 of office equipment on credit.

15 The company completed work for a customer on credit in the amount of \(8,200.

17 The company purchased \)3,100 of office supplies on credit.

23 The company paid \(2,300 cash for the office equipment purchased on July 10.

25 The company billed a customer \)5,000 for work completed; the balance is due in 30 days.

28 The company received \(8,200 cash for the work completed on July 15.

30 The company paid an assistant’s salary of \)1,560 cash for this month.

31 The company paid \(295 cash for this month’s utility bill.

31 The company paid \)1,800 cash in dividends to the owner (sole shareholder).

Required 3. Prepare the statement of cash flows for the month of July.
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