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Chapter. 1
1-1
As in many ethics issues, there is no one right answer. The local newspaper reported on this issue in these terms: The company covered up the first report, and the local newspaper uncovered the companys secret. The company was forced to not locate here (Collier
1-2
1. B 2. B 3. E 4. F 5. B 6. F
7. X 8. E 9. X 10. B
1-3
a. $96,500 ($25,000 + $71,500)
b. $67,750 ($82,750 – $15,000)
c. $19,500 ($37,000 – $17,500)
1-4
a. $275,000 ($475,000 – $200,000)
b. $310,000 ($275,000 + $75,000 – $40,000)
c. $233,000 ($275,000 – $15,000 – $27,000)
d. $465,000 ($275,000 + $125,000 + $65,000)
e. Net income: $45,000 ($425,000 – $105,000 – $275,000)
1-5
a. owners equity b.liability c.asset d.asset e.owners equity f. asset
1-6
a. Increases assets and increases owner’s equity.
b. Increases assets and increases owner’s equity.
c. Decreases assets and decreases owner’s equity.
d. Increases assets and increases liabilities.
e. Increases assets and decreases assets.
1-7
1. increase 2. decrease 3.increase 4. decrease
1-8
a. (1) Sale of catering services for cash, $25,000.
(2) Purchase of land for cash, $10,000.
(3) Payment of expenses, $16,000.
(4) Purchase of supplies on account, $800.
(5) Withdrawal of cash by owner, $2,000.
(6) Payment of cash to creditors, $10,600.
(7) Recognition of cost of supplies used, $1,400.
b. $13,600 ($18,000 – $4,400)
c. $5,600 ($64,100 – $58,500)
d. $7,600 ($25,000 – $16,000 – $1,400)
e. $5,600 ($7,600 – $2,000)
1-9
It would be incorrect to say that the business had incurred a net loss of $21,750. The excess of the withdrawals over the net income for the period is a decrease in the amount of owner’s equity in the business.
1-10
Balance sheet items: 1, 3, 4, 8, 9, 10
1-11
Income statement items: 2, 5, 6, 7
1-12
MADRAS COMPANY
Statement of Owner’s Equity
For the Month Ended April 30, 2006
Leo Perkins, capital, April 1, 2006 $297,200
Net income for the month $73,000
Less withdrawals
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