Chapter 1: Q30DQ (page 29)
Describe the three major business activities in organizations
An organization is a group of people that works to achieve one common organizational goal, and its three major activities are operating, investing, and financing activities.
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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
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
Define return and risk. Discuss the trade-off between them.
Ford Motor Company, one of the world’s largest automakers, reports the following income statement accounts for the year ended December 31, 2015 (\( in millions). Use this information to prepare Ford’s income statement for the year ended December 31, 2015.
Selling and administrative costs . . . . . . . . . . . . \) 14,999
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,041
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,558
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . 3,145
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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