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Chapter 1: Q7BTN_1 (page 48)

Question: Refer to this chapter’s opening feature about Apple. Assume that the owners decide to open a new company with an innovative mobile app devoted to microblogging for accountants and those learning accounting. This new company will be called AccountApp.

Required

1. AccountApp obtains a \(500,000 loan and the two owners contribute \)250,000 in total from their own savings in exchange for ownership of the new company.

a. What is the new company’s total amount of liabilities plus equity?

b. What is the new company’s total amount of assets?

Short Answer

Expert verified

The liabilities plus equity and assets are $750,000

Step by step solution

01

Computation of liabilities plus equity

02

Computation of total assets


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Most popular questions from this chapter

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

What do accountants mean by the term revenue?

Question: Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities. Classify the following activities as part of the identifying (I), recording (R), or communicating (C) aspects of accounting. 1. Analyzing and interpreting reports. 2. Presenting financial information. 3. Keeping a log of service costs. 4. Measuring the costs of a product. 5. Preparing financial statements. 6. Seeing revenues generated from a service. 7. Observing employee tasks behind a product. 8. Registering cash sales of products sold.

Match each of the numbered descriptions 1 through 9 with the term or phrase it best reflects. Indicate your answer by writing the letter A through I for the term or phrase in the blank provided. A. Ethics B. Ethical path C. Fraud triangle D. Prevention E. Internal controls F. Sarbanes-Oxley Act G. Audit H. Dodd-Frank Act I. Clawback

1. Recovery of excess incentive compensation.

2. Promotes accountability and transparency, and protects consumers from abusive financial services.

3. Examines whether financial statements are prepared using GAAP; it does not ensure absolute accuracy of the statements.

4. Requires documentation and verification of internal controls and increases emphasis on internal control effectiveness.

5. Procedures set up to protect company property and equipment, ensure reliable accounting, promote efficiency, and encourage adherence to policies.

6. A less expensive and more effective means to stop fraud.

7. Three factors must exist for a person to commit fraud: opportunity, pressure, and rationalization.

8. Course of action that avoids casting doubt on one’s decisions.

9. Beliefs that distinguish right from wrong.

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
See all solutions

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