Accounting Cycle Exercises I - Kenyatta University

1 Accounting Cycle Exercises I. Larry M. Walther Christopher J. Skousen Download free books at Larry M. Walther & Christopher J. Skousen Accounting Cycle Exercises I. Download free ebooks at 2. Accounting Cycle Exercises I. 2010 Larry M. Walther, Christopher J. Skousen & Ventus Publishing ApS. All material in this publication is copyrighted, and the exclusive property of Larry M. Walther or his licensors (all rights reserved). ISBN 978-87-7681-554-7. Download free ebooks at 3. Accounting Cycle Exercises I Contents Contents Problem 1 6. Worksheet 1 6. Solution 1 8. Problem 2 9. Worksheet 2 10. Solution 2 12. Problem 3 14. Worksheet 3 14. Solution 3 16. Problem 4 17. Worksheet 4 17. Solution 4 18. Problem 5 19. Worksheet 5 20. Solution 5 32. Fast-track your career Please click the advert Masters in Management Stand out from the crowd Designed for graduates with less than one year of full-time postgraduate work experience, London Business School's Masters in Management will expand your thinking and provide you with the foundations for a successful career in business.

2 The programme is developed in consultation with recruiters to provide you with the key skills that top employers demand. Through 11 months of full-time study, you will gain the business knowledge and capabilities to increase your career choices and stand out from the crowd. London Business School Applications are now open for entry in September 2011. Regent's Park London NW1 4SA. United Kingdom Tel +44 (0)20 7000 7573. For more information visit Email email or call +44 (0)20 7000 7573. Download free ebooks at 4. Accounting Cycle Exercises I Contents Problem 6 44. Worksheet 6 44. Solution 6 45. Problem 7 46. Worksheet 7 47. Solution 7 49. Problem 8 52. Worksheet 8 53. Solution 8 54. UBS 2010. All rights reserved. You're full of energy and ideas. And that's just what we are looking for. Please click the advert Looking for a career where your ideas could really make a di erence?

3 UBS's Graduate Programme and internships are a chance for you to experience for yourself what it's like to be part of a global team that rewards your input and believes in succeeding together. Wherever you are in your academic career, make your future a part of ours by visiting Download free ebooks at 5. Accounting Cycle Exercises I Problem 1: Worksheet Problem 1. Juniper Corporation provided the following summary balance sheet information: Dec. 31, 20X8 Dec. 31, 20X9. Total Assets $2,500,000 $3,800,000. Total Liabilities 900,000 1,300,000. Compute net income for the year ending December 31, 20X9, under each of the following independent scenarios: a) Juniper paid no dividends, and no additional capital was raised via share issuances. b) Juniper paid $300,000 in dividends, and no additional capital was raised via share issuances.

4 C) Juniper paid no dividends, but raised $1,500,000 via issuances of additional shares of stock. d) Juniper paid $300,000 in dividends, and raised $1,150,000 via issuances of additional shares of stock. Worksheet 1. Dec. 31, 20X8 Dec. 31, 20X9. Total Assets $2,500,000 $3,800,000. Total Liabilities 900,000 1,300,000. Total Equity Ending Equity Total Liabilities Total Equity a) Juniper paid no dividends, and no additional capital was raised via share issuances. b) Juniper paid $300,000 in dividends, and no additional capital was raised via share issuances. c) Juniper paid no dividends, but raised $1,500,000 via issuances of additional shares of stock. Download free ebooks at 6. Accounting Cycle Exercises I Problem 1: Worksheet d) Juniper paid $300,000 in dividends, and raised $1,150,000 via issuances of additional shares of stock.

5 Download free ebooks at 7. Accounting Cycle Exercises I Problem 1: Solution Solution 1. Dec. 31, 20X8 Dec. 31, 20X9. Total Assets $2,500,000 $3,800,000. Total Liabilities 900,000 1,300,000. Total Equity $ 1,600,000 $ 2,500,000. Ending Equity $ 2,500,000. Beginning Equity 1,600,000. Change in Equity $ 900,000. a) Juniper paid no dividends, and no additional capital was raised via share issuances. Because there were no dividends and no issues of stock, the $900,000 increase in equity is all attributable to net income. $1,600,000 + $0 for stock issuances - $0 for dividends + net income ($900,000) = $2,500,000. b) Juniper paid $300,000 in dividends, and no additional capital was raised via share issuances. Because there were $300,000 in dividends and no issues of stock, the $900,000 increase in equity would require a $1,200,000 net income.

6 $1,600,000 + $0 for stock issuances - $300,000 for dividends + net income ($1,200,000) =. $2,500,000. c) Juniper paid no dividends, but raised $1,500,000 via issuances of additional shares of stock. Because there were no dividends, but $1,500,000 of stock issuances, Juniper had a net loss of $600,000. $1,600,000 + $1,500,000 for stock issuances - $0 for dividends + net income (-$600,000) =. $2,500,000. d) J uniper paid $300,000 in dividends, and raised $1,150,000 via issuances of additional shares of stock. Because there were $300,000 in dividends, and $1,150,000 of stock issuances, Juniper had a net income of $50,000. $1,600,000 + $1,150,000 for stock - $300,000 for dividends + net income ($50,000) = $2,500,000. Download free ebooks at 8. Accounting Cycle Exercises I Problem 2. Problem 2. TOP Corporation was formed at the beginning of 20X2, and presents the following incomplete financial statements for three years.

7 TOP has requested your help in completing the missing values for each year. Hint: Begin by solving the unknowns in the 20X2 year, and work forward to subsquent years. Remember that 20X2 is the first year of business, so TOP begins with a zero balance in 20X2 beginning retained earnings. TOP CORPORATION. Income Statement For the Years Ending December 31, 20XX. 20X4 20X3 20X2. Revenues Services to customers $ 100,000 ? $ 50,000. Expenses Wages ? $ 58,500 ? Interest 1,500 ? 1,500 ? 2,500 ? Net income ? $ 20,000 ? TOP CORPORATION. Statement of Retained Earnings For the Years Ending December 31, 20XX. 20X4 20X3 20X2. Beginning retained earnings ? ? $ - Plus: Net income ? 20,000 ? ? ? $ 12,500. Less: Dividends 15,000 ? ? Ending retained earnings $ 30,000 ? ? Download free ebooks at 9. Accounting Cycle Exercises I Problem 2: Worksheet TOP CORPORATION.

8 Balance Sheet December 31, 20XX. 20X4 20X3 20X2. Assets Cash ? ? $ 25,000. Accounts receivable 32,500 25,000 ? Land 90,000 90,000 90,000. Total assets ? $ 144,500 ? Liabilities Interest payable ? $ 500 $ 1,000. Loan payable 5,000 ? ? Total liabilities $ 5,500 $ 15,500. Stockholders' equity Capital stock ? ? $114,000. Retained earnings ? 15,000 ? Total stockholders' ? ? 119,000. equity Total Liabilities and $ 149,500 ? $ 150,000. equity Worksheet 2. TOP CORPORATION. Income Statement For the Years Ending December 31, 20XX. 20X4 20X3 20X2. Revenues Services to customers $ 100,000 ? $ 50,000. Expenses Wages ? $ 58,500 ? Interest 1,500 ? 1,500 ? 2,500 ? Net income ? $ 20,000 ? Download free ebooks at 10. Accounting Cycle Exercises I Problem 2: Worksheet TOP CORPORATION. Statement of Retained Earnings For the Years Ending December 31, 20XX.

9 20X4 20X3 20X2. Beginning retained earnings ? ? $ - Plus: Net income ? 20,000 ? ? ? $ 12,500. Less: Dividends 15,000 ? ? Ending retained earnings $ 30,000 ? ? TOP CORPORATION. Balance Sheet December 31, 20XX. 20X4 20X3 20X2. Assets Cash ? ? $ 25,000. Accounts receivable 32,500 25,000 ? Land 90,000 90,000 90,000. Total assets ? $ 144,500 ? Liabilities Interest payable ? $ 500 $ 1,000. Loan payable 5,000 ? ? Total liabilities $ 5,500 $ 15,500 ? Stockholders' equity Capital stock ? ? $114,000. Retained earnings ? 15,000 ? Total stockholders' ? ? 119,000. equity Total Liabilities and $ 149,500 ? $ 150,000. equity Download free ebooks at 11. Accounting Cycle Exercises I Problem 2: Solution Solution 2. TOP CORPORATION. Income Statement For the Years Ending December 31, 20XX. 20X4 20X3 20X2. Revenues Services to customers $ 100,000 $ 80,000 $ 50,000.

10 Expenses Wages $ 68,500 $ 58,500 35,000. Interest 1,500 70,000 1,500 60,000 2,500 37,500. Net income $ 30,000 $ 20,000 $ 12,500. Please click the advert Download free ebooks at 12. Accounting Cycle Exercises I Problem 2: Solution TOP CORPORATION. Statement of Retained Earnings For the Years Ending December 31, 20XX. 20X4 20X3 20X2. Beginning retained earnings $ 15,000 $ 5,000 $ - Plus: Net income 30,000 20,000 $ 12,500. $ 45,000 $ 25,000 $ 12,500. Less: Dividends 15,000 10,000 7,500. Ending retained earnings $ 30,000 $ 15,000 $ 5,000. TOP CORPORATION. Balance Sheet December 31, 20XX. 20X4 20X3 20X2. Assets Cash $ 27,000 $ 29,500 $ 25,000. Accounts receivable 32,500 25,000 35,000. Land 90,000 90,000 90,000. Total assets $ 149,500 $ 144,500 $ 150,000. Liabilities Interest payable $ 500 $ 500 $ 1,000. Loan payable 5,000 15,000 30,000.