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    Accounting problems

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    Chapter 2
    2-14 Expanded Accounting Equation
    For the following four cases, use the expanded accounting equation to compute the missing quantity

    Assets liabilities Capital stock Retained earnings
    Case A $20,000 $8,000 A $3,500
    Case B 16,000 B $5,000 2,000
    Case C C 11,000 14,000 32,000
    Case D 46,000 30,000 20,000 D

    Exercise 2-6
    Balance Sheet preparation
    From the following data, prepare a classified balance sheet for Simon Company at December 31, 2006

    Accounts payable.................................................$62,500
    Accounts receivable............................................... 123,000
    Buildings............................................................418,000
    Owner's equity 01/01/06............................................210,000
    Cash...................................................................179,750
    Distribution to owners during 2006................................21,750
    Supplies................................................................3,750
    Land.................................................................... 130,000
    Mortgage payable......................................................479,500
    Net income for 2006.................................................. 124,750
    Owner equity 12/31/06................................................. ...?

    2-8 Income Statement preparation
    The following selected information is taken from the records of Beckstrom Corporation

    Accounts payable.................................................$35,000
    Accounts receivable................................................65,000
    Advertising expense.................................................15,000
    Cash.....................................................................19,500
    Supplies expense......................................................46,000
    Rent expense............................................................10,000
    Utilities expense.........................................................3,000
    Income taxes (30% of income before taxes)............................?
    Misc. expense..............................................................4,400
    Owners equity..............................................................140,000
    Salaries expense............................................................61,000
    Fees (revenue)........................................................ 384,000

    Prepare an income statement for the year ended December 31, 2006. (Assume that 7,500 shares of stock are outstanding)

    2-9 Cash flow computation
    From the following selected data compute

    1. Net cash flow provided (used) by operating activities
    2. Net cash flow provided (used) by investing activities
    3. Net cash flow provided (used) by financing activities
    4. Net increase (decrease) in cash during the year
    5. The cash balance at the end of the year

    Cash receipts from:
    Customers.....................$270,000
    Investment by owners.........54,000
    Sale of building................90,000
    Proceeds from bank loan......60,000

    Cash payments for:
    Wages........................................$82,000
    Utilities....................................3,000
    Advertising..............................4,000
    Rent......................................36,000
    Taxes....................................67,000
    Dividends...............................20,000
    Repayment of principal on loan......40,000
    Purchase of land.........................106,000
    Cash balance at beginning of year ...............$386,000

    2-11 Retained earning computations

    During 2006, Edgemont Corporation had revenues of $230,000 and expenses, including income taxes of $190,000. On December 31, 2005, Edgemont had assets of $ 350,000, liabilities of $80,000 and capital stock $210,000. Edgemont paid a cash dividend of $25,000 in 2006. No additional stock was issued compute the retained earnings for December 31, 2005.

    2-14 Cash flow classifications

    For each of the following items indicate whether it would be classified and reported the operating activities (OA), investing activities (IA), or financing activities (FA) section of statement cash flows:

    a Cash receipts from selling merchandise
    b Cash payments for wages and salaries
    c Cash proceeds from sale of stock
    d Cash purchase of equipment
    e Cash dividends paid
    f Cash received from bank loan
    g Cash payments for inventory
    h Cash receipts from services rendered
    i Cash payments for taxes
    j Cash proceeds from sale of property no longer needed as expansion site

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    Chapter 2
    2-14 Expanded Accounting Equation
    For the following four cases, use the expanded accounting equation to compute the missing quantity

    Assets liabilities Capital stock Retained earnings

    Case A $20,000 $8,000 A $3,500

    Case B 16,000 B $5,000 2,000

    Case C C 11,000 14,000 32,000

    Case D 46,000 30,000 20,000 D

    Assets = Liabilities + Equity + Retained Earnings

    Case A 20,000 = 8,000 + A + 3,500
    A = 8,500

    Case B 16,000 = B + 5,000 + 2,000
    B = 9,000

    Case C C = 11,000 + 14,000 + 32,000
    C = 57,000

    Case D 46,000 = 30,000 + 20,000 + D
    D = -4,000

    Exercise 2-6
    Balance Sheet preparation
    From the following data, prepare a classified balance sheet for Simon Company at December 31, 2006

    Accounts payable.................................................$62,500
    Accounts receivable............................................... 123,000
    Buildings............................................................418,000
    Owner's equity 01/01/06............................................210,000
    Cash...................................................................179,750
    Distribution to owners during 2006................................21,750
    Supplies................................................................3,750
    Land.................................................................... 130,000
    Mortgage payable......................................................479,500
    Net income for 2006.................................................. 124,750
    Owner equity 12/31/06................................................. ...?
    Simon Company
    Statement of Retained Earnings
    For the year ended December 31, 2006

    Owners' equity, 1/1/06 210,000
    Add: Net income for 2006 124,750
    Less: Distributions to owners during 2006 21,750
    Owners' ...

    Solution Summary

    This solution is to answer how to use the expanded accounting equation to compute the missing quantity, prepare a classified balance sheet for Simon Company, Income Statement preparation of Beckstrom Corporation, Cash flow computation, retained earning computations of Edgemont Corporation, and Cash flow classifications.

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