Chapter 1: Q29DQ (page 29)
Define return and risk. Discuss the trade-off between them.
Risk refers to the uncertainty of return, and return is the net income of the business. When risk increases, return also increases and vice-versa.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Answer the following questions. (Hint: Use the accounting equation.)
a. At the beginning of the year, Addison Company’s assets are \(300,000 and its equity is \)100,000. During the year, assets increase \(80,000 and liabilities increase \)50,000. What is the equity at year-end?
b. Office Store has assets equal to \(123,000 and liabilities equal to \)47,000 at year-end. What is the equity for Office Store at year-end?
c. At the beginning of the year, Quaker Company’s liabilities equal \(70,000. During the year, assets increase by \)60,000, and at year-end assets equal \(190,000. Liabilities decrease \)5,000 during the year. What are the beginning and ending amounts of equity
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.
Question: Technology is increasingly used to process accounting data. Why then must we study and understand accounting?
Why is the revenue recognition principle needed? What does it demand?
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 you think about this solution?
We value your feedback to improve our textbook solutions.
