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Multiple Choice, financial statements for Rustic Camp Sites,

Part I Multiple Choice (worth 1 point each for total of 5 points)
(clearly identify the correct letter)

1. Borrowing money is an example of a(n)
answer_________
a. delivering activity.
b. financing activity.
c. investing activity.
d. operating activity.

2. . Issuing shares of stock in exchange for cash is an example of a(n)
answer _________
a. delivering activity.
b. investing activity.
c. financing activity.
d. operating activity.

3. State the Accounting Equation:
answer _________
a. Assets + Liabilities = Equity
b. Assets + Equity = Liabilities
c. Assets = Liabilities - Equity
d. Assets = Liabilities + Equity

4. Bulldog Company purchased land for $50,000 cash. A financial statement impact of this transaction is:
answer _________
a. Assets decreased
b. Equity increased
c. Cash decreased
d. Liabilities increased

5. Maroon Company borrowed $100,000 from First Bank. A financial statement impact of this transaction is:
answer _________
a. Assets decreased
b. Equity increased
c. Cash decreased
d. Liabilities increased

Part II Exercise Transactions Analysis (worth 5 points)
During 2005 Rustic Camp Sites experienced the following transactions.
1. RCS acquired $32,000 cash by issuing common stock.
2. RCS received $116,000 cash for providing services to customers (leasing camp sites).
3. RCS paid $13,000 cash for salaries expenses.
4. RCS paid a $9,000 cash dividend to the owners.
5. RCS sold land that had cost $100,000 for $100,000 cash.
6. RCS paid $47,000 cash for other operating expenses.
Required
a. For each transaction above explain which accounts are impacted (increase or decrease) and classify the impact it will have on the Balance Sheet and Income Statement (such as Asset, Liability, Equity, Revenue, Expense). If there is no impact, then state as such. (worth 3 points)
The first transaction has been completed as an example below
Transaction # Identify Accounts Increased Identify Accounts Decreased Classify All Types of Balance Sheet Accounts Impacted (Asset, Liability or No impact) Classify All Types of Income Statement Accounts Affected (Revenue, Expense or No Impact)
1 Cash increase, and Common Stock increase N/A Assets increase for Cash and Equity increases for Common Stock No impact
2
3
4
5
6

b. What amount of net income will RCS report on the 2005 income statement? Show your calculation for revenue and operating expenses . (worth 2 points)

Part III Problem Preparing Financial Statements (worth 5 points)
The Income and Statement and Balance Sheet are worth 2 points each and the Retained Earnings Statement is worth 1 point. Make sure you complete all 3 financial statements as noted.

Prepare an income statement, a retained earnings statement, and a balance sheet for the medical practice of Donna Bruck, MD, from the items listed below for the month of October 2007.

Retained earnings (October 1) $15,000
Common stock 30,000
Accounts payable 6,000
Equipment 32,000
Service revenue 26,000
Dividends 6,000
Dental supplies expense 3,500
Cash 13,000
Utilities expense 700
Dental supplies 2,800
Salaries expense 7,000
Accounts receivable 10,000
Rent expense 2,000

DONNA BRUCK, MD
Income Statement
For the Month Ended October 31, 2007

Revenues $

Expenses $

Total expenses

Net income $ t

DONNA BRUCK, MD
Retained Earnings Statement
For the Month Ended October 31, 2007

Retained Earnings, October 1 $
Add:

Less:

$ t

DONNA BRUCK, MD
Balance Sheet
October 31, 2007

Assets
$

Total assets
$ t

Liabilities and Stockholders' Equity
Liabilities
$
Stockholders' Equity
$

Total liabilities and stockholders' equity $ t

Attachments

Solution Preview

Part I Multiple Choice
(clearly identify the correct letter)

1. Borrowing money is an example of a(n)
answer_________
a. delivering activity.
b. financing activity.
c. investing activity.
d. operating activity.

2. . Issuing shares of stock in exchange for cash is an example of a(n)
answer _________
a. delivering activity.
b. investing activity.
c. financing activity.
d. operating activity.

3. State the Accounting Equation:
answer _________
a. Assets + Liabilities = Equity
b. Assets + Equity = Liabilities
c. Assets = Liabilities - Equity
d. Assets = Liabilities + Equity

4. Bulldog Company purchased land for $50,000 cash. A financial statement impact of this transaction is:
answer _________
a. Assets decreased
b. Equity increased
c. Cash decreased
d. Liabilities increased

5. Maroon Company borrowed $100,000 from First Bank. A financial statement impact of this transaction is:
answer _________
a. Assets decreased
b. Equity increased
c. Cash decreased
d. Liabilities increased

Part II Exercise Transactions Analysis
During 2005 Rustic Camp Sites experienced the following transactions.
1. RCS acquired $32,000 cash by issuing common stock.
2. RCS received ...

Solution Summary

This solution is comprised of a detailed explanation to answer finance multiple choices such as borrowing money is an example of which activity, explain which accounts are impacted (increase or decrease) from given accounting transactions and classify the impact it will have on the Balance Sheet and Income Statement (such as Asset, Liability, Equity, Revenue, Expense), calculate what amount of net income will RCS report on the 2005 income statement, and prepare an income statement, a retained earnings statement, and a balance sheet for the medical practice of Donna Bruck, MD.

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