,Solution manual For College Accounting 1st
Edition by Jerry J. Weygandt
Hello all ,
We have all what you need with best price
Our email :
Our website :
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, CHAPTER 1
Welcome to Accounting: Introduction
and Financial Statements
ANSWERS TO QUESTIONS
1. Yes, this is correct. Virtually every organization and person in our society uses accounting
information. Businesses, investors, creditors, government agencies, and not-for-profit organizations
must use accounting information to operate effectively.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
2. Accounting is the process of identifying, recording, and communicating the economic events of
an organization to interested users of the information. The first step of the accounting process is
therefore to identify economic events that are relevant to a particular business. Once identified
and measured, the events are recorded to provide a history of the financial activities of the
organization. Recording consists of keeping a chronological diary of these measured events in an
orderly and systematic manner. The information is communicated through the preparation and
distribution of accounting reports, the most common of which are called financial statements.
A vital element in the communication process is the accountant’s ability and responsibility to
analyze and interpret the reported information.
LO1 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
3. No, this is incorrect. Bookkeeping usually involves only the recording of economic events and
therefore is just one part of the entire accounting process. Accounting, on the other hand, involves
the entire process of identifying, recording, and communicating economic events.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
4. (a) Internal users are those who plan, organize, and run the business and therefore are officers
and other decision makers.
(b) To assist management, managerial accounting provides internal reports. Examples include
financial comparisons of operating alternatives, projections of income from new sales
campaigns, and forecasts of cash needs for the next year.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
5. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell
ownership shares of a company.
(b) Creditors use accounting information to evaluate the risks of granting credit or lending money.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
6. The three basic forms of business organizations are: (1) proprietorship, (2) partnership, and
(3) corporation.
LO2 BT: K Difficulty: Easy TOT:1 min. AACSB: None AICPA FC: Reporting
7. Trenton Travel Agency should report the land at $90,000 on its December 31, 2022 balance
sheet. This is true not only at the time the land is purchased, but also over the time the land is
held. In determining which measurement principle to use (cost or fair value) companies weigh the
factual nature of cost figures versus the relevance of fair value. In general, companies use the
cost principle.
LO3 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Measurement Analysis and Interpretation
Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only) 1-1
,Questions Chapter 1 (Continued)
8. The monetary unit assumption requires that only transaction data that can be expressed in terms
of money be included in the accounting records. This assumption enables accounting to quantify
(measure) economic events.
LO3 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement Analysis and Interpretation
9. The economic entity assumption requires that the activities of the entity be kept separate and
distinct from the activities of its owners and all other economic entities.
LO3 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement Analysis and Interpretation
10. One of the advantages Rachel Hipp would enjoy is that ownership of a corporation is represented
by transferable shares of stock. This would allow Rachel to raise money easily by selling
a part of her ownership in the company. Another advantage is that because holders of the shares
(stockholders) enjoy limited liability; they are not personally liable for the debts of the corporate
entity. Also, because ownership can be transferred without dissolving the corporation, the corporation
enjoys an unlimited life.
LO2 BT: K Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
11. (a) Income statement. (d) Balance sheet.
(b) Balance sheet. (e) Balance sheet and owner’s equity statement.
(c) Income statement. (f) Balance sheet.
LO4 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
12. No, this treatment is not proper. While the transaction does involve a receipt of cash, it does not
represent revenues. Revenues are the gross increase in owner’s equity resulting from business
activities entered into for the purpose of earning income. This transaction is simply an additional
investment made by the owner in the business.
LO4 BT: C Difficulty: Medium TOT: 3 min. AACSB: None AICPA FC: Reporting
13. Yes. Net income does appear on the income statement—it is the result of subtracting expenses
from revenues. In addition, net income appears in the owner’s equity statement—it is shown as
an addition to the beginning-of-period capital. Indirectly, the net income of a company is also
included in the balance sheet. It is included in the capital account which appears in the owner’s
equity section of the balance sheet.
LO4 BT: C Difficulty: Medium TOT: 4 min. AACSB: None AICPA FC: Reporting
14. (a) Ending capital balance....................................................................................... $198,000
Less: Beginning capital balance......................................................................... 168,000
Net income......................................................................................................... $ 30,000
($198,000 – $168,000 = $30,000)
(End. cap. bal. – Beg. cap. bal. = Net inc.)
(b) Ending capital balance....................................................................................... $198,000
Less: Beginning capital balance......................................................................... 168,000
30,000
Deduct: Investment........................................................................................... 13,000
Net income......................................................................................................... $17,000
($198,000 – $168,000 – $13,000 = $17,000)
(End. cap. bal. – Beg. cap. bal. – Invest. = Net. inc.)
LO4 BT: AN Difficulty: Medium TOT: 4 min. AACSB: Analytic AICPA FC: Reporting
1-2 Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only)
,Questions Chapter 1 (Continued)
15. Total revenues ................................................................................................... $70,000
Total expenses................................................................................................... 40,000
Net income......................................................................................................... $30,000
($70,000 – $40,000 = $30,000)
(Tot. rev. – Tot. exp. = Net inc.)
LO4 BT: AP Difficulty: Medium TOT: 4 min. AACSB: Analytic AICPA FC: Reporting
16. Three job opportunities in public accounting include 1) auditing, 2) taxation and 3) management
consulting.
LO5 BT: AP Difficulty: Easy TOT: 1min. AACSB: None AICPA FC: Reporting
Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only) 1-3
, SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 1.1
Asset Liability Owner’s Equity
Cash Accounts payable Owner’s capital
Equipment Notes payable
Supplies Salaries and
Accounts receivable wages payable
LO4 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
BRIEF EXERCISE 1.2
BS (a) Notes payable
IS (b) Advertising expense
OE, BS (c) Owner’s capital
BS (d) Cash
IS (e) Service revenue
LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting
BRIEF EXERCISE 1.3
MENDOZA COMPANY
Balance Sheet
December 31, 2022
Assets
Cash................................................................................................. $ 49,000
Accounts receivable....................................................................... 72,500
Total assets ............................................................................. $121,500
Liabilities and Owner’s Equity
Liabilities
Accounts payable ................................................................... $ 90,000
Owner’s equity
Owner’s capital........................................................................ 31,500
Total liabilities and owner’s equity................................ $121,500
[$49,000 + $72,500 = $90,000 + $31,500]
[(Cash + Accts. rec.) = Accts. pay. + Owner’s cap.]
LO4 BT: AP Difficulty: Easy TOT: 4 min. AACSB: Analytic AICPA FC: Reporting
1-4 Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only)
,BRIEF EXERCISE 1.4
ARMANDA CO.
Income Statement
For the Year Ended December 31, 2022
Revenues
Service revenue...................................................... $63,600
Expenses
Salaries and wages expense................................. $29,500
Rent expense.......................................................... 10,400
Utilities expense..................................................... 3,100
Advertising expense.............................................. 1,800
Total expenses................................................ 44,800
Net income...................................................................... $18,800
[$63,600 – ($29,500 + $10,400 + $3,100 + $1,800) = $18,800
[Serv. rev. – (Sal. & wages exp. + Rent exp. + Util. exp. + Advert. exp.) = Net inc.]
ARMANDA CO.
Owner’s Equity Statement
For the Year Ended December 31, 2022
Owner’s capital, January 1............................................................... $48,000
Add: Net income.............................................................................. 18,800
66,800
Less: Drawings................................................................................. 6,000
Owner’s capital, December 31 ......................................................... $60,800
($48,000 + $18,800 - $6,000 = $60,800)
(Beg. owner’s cap. + Net inc. – Owner’s draw. = End. owner’s cap.)
LO4 BT: AP Difficulty: Medium TOT: 10 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE 1.5
OE (1) Drawings
IS (2) Rent revenue
IS (3) Advertising expense
OE (4) Owner investment
BS (5) Supplies
BS (6) Accounts payable
LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting
Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only) 1-5
,BRIEF EXERCISE 1.6
Cash flows from operating activities............................................ $5,890
Cash flows from investing activities............................................. (3,500)
Cash flows from financing activities............................................. 1,400
Net change in cash......................................................................... $3,790
LO4 BT: AP Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Reporting
1-6 Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only)
, SOLUTIONS TO DO IT! EXERCISES
DO IT! 1.1
1. False. The three steps in the accounting process are identification,
recording, and communication.
2. True.
3. False. Financial accounting provides reports to help investors and
creditors evaluate a company.
4. True.
5. True.
LO1 BT: K Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement Analysis and Interpretation
DO IT! 1.2
1. False. A business owned by two or more persons associated as partners
is a partnership.
2. True.
3. False. A manufacturing company converts raw materials into finished
goods to sell to customers.
4. True.
5. False. A department store is an example of a retail (merchandise)
company.
LO2 BT: K Difficulty: Easy TOT: 4 min. ACSB: None AICPA FC: Measurement Analysis and Interpretation
DO IT! 1.3
1. False. Congress passed the Sarbanes-Oxley Act to reduce unethical
behavior and decrease the likelihood of future corporate scandals.
2. False. The standards of conduct by which actions are judged as right
or wrong, honest or dishonest, fair or not fair, are ethics.
3. False. The primary accounting standard-setting body in the United
States is the Financial Accounting Standards Board (FASB).
4. True.
5. True.
LO3 BT: K Difficulty: Easy TOT: 4 min. ACSB: None AICPA FC: Measurement Analysis and Interpretation
Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only) 1-7
, DO IT! 1.4
(a) The total assets are $49,000, comprised of Cash $6,500, Accounts
Receivable $13,500, and Equipment $29,000.
($6,500 + $13,500 + $29,000 = $49,000)
(Cash + Accts. rec. + Equip. = Tot. assets)
(b) Net income is $20,500, computed as follows:
Revenues
Service revenue................................................... $53,500
Expenses
Salaries and wages expense.............................. $16,500
Rent expense....................................................... 10,500
Advertising expense........................................... 6,000
Total expenses............................................ 33,000
Net income .................................................................. $20,500
[$53,500 – ($16,500 + $10,500 + $6,000) = $20,500]
[Serv. rev. – (Sal. & wages exp. + Rent exp. + Advert. exp) = Net inc.]
(c) The ending owner’s equity balance of Kirby Company is $21,000. By
rewriting the sections as they appear on the balance sheet, we can
compute Owner’s Equity as Assets minus Liabilities, as follows:
Total assets [as computed in (a)].............................. $49,000
Less: Liabilities
Notes payable...................................................... $25,000
Accounts payable ............................................... 3,000 28,000
Owner’s equity............................................................ $21,000
Note that it is not possible to determine the company’s owner’s equity in
any other way, because the beginning balance for owner’s equity is not
provided.
[$49,000 – ($25,000 + $3,000) = $21,000]
[Tot. assets – (Notes pay. + Accts. pay.) = Owner’s equity]
1-8 Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only)
Edition by Jerry J. Weygandt
Hello all ,
We have all what you need with best price
Our email :
Our website :
testbanks-store.com
, CHAPTER 1
Welcome to Accounting: Introduction
and Financial Statements
ANSWERS TO QUESTIONS
1. Yes, this is correct. Virtually every organization and person in our society uses accounting
information. Businesses, investors, creditors, government agencies, and not-for-profit organizations
must use accounting information to operate effectively.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
2. Accounting is the process of identifying, recording, and communicating the economic events of
an organization to interested users of the information. The first step of the accounting process is
therefore to identify economic events that are relevant to a particular business. Once identified
and measured, the events are recorded to provide a history of the financial activities of the
organization. Recording consists of keeping a chronological diary of these measured events in an
orderly and systematic manner. The information is communicated through the preparation and
distribution of accounting reports, the most common of which are called financial statements.
A vital element in the communication process is the accountant’s ability and responsibility to
analyze and interpret the reported information.
LO1 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
3. No, this is incorrect. Bookkeeping usually involves only the recording of economic events and
therefore is just one part of the entire accounting process. Accounting, on the other hand, involves
the entire process of identifying, recording, and communicating economic events.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
4. (a) Internal users are those who plan, organize, and run the business and therefore are officers
and other decision makers.
(b) To assist management, managerial accounting provides internal reports. Examples include
financial comparisons of operating alternatives, projections of income from new sales
campaigns, and forecasts of cash needs for the next year.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
5. (a) Investors (owners) use accounting information to make decisions to buy, hold, or sell
ownership shares of a company.
(b) Creditors use accounting information to evaluate the risks of granting credit or lending money.
LO1 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
6. The three basic forms of business organizations are: (1) proprietorship, (2) partnership, and
(3) corporation.
LO2 BT: K Difficulty: Easy TOT:1 min. AACSB: None AICPA FC: Reporting
7. Trenton Travel Agency should report the land at $90,000 on its December 31, 2022 balance
sheet. This is true not only at the time the land is purchased, but also over the time the land is
held. In determining which measurement principle to use (cost or fair value) companies weigh the
factual nature of cost figures versus the relevance of fair value. In general, companies use the
cost principle.
LO3 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Measurement Analysis and Interpretation
Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only) 1-1
,Questions Chapter 1 (Continued)
8. The monetary unit assumption requires that only transaction data that can be expressed in terms
of money be included in the accounting records. This assumption enables accounting to quantify
(measure) economic events.
LO3 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement Analysis and Interpretation
9. The economic entity assumption requires that the activities of the entity be kept separate and
distinct from the activities of its owners and all other economic entities.
LO3 BT: K Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Measurement Analysis and Interpretation
10. One of the advantages Rachel Hipp would enjoy is that ownership of a corporation is represented
by transferable shares of stock. This would allow Rachel to raise money easily by selling
a part of her ownership in the company. Another advantage is that because holders of the shares
(stockholders) enjoy limited liability; they are not personally liable for the debts of the corporate
entity. Also, because ownership can be transferred without dissolving the corporation, the corporation
enjoys an unlimited life.
LO2 BT: K Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
11. (a) Income statement. (d) Balance sheet.
(b) Balance sheet. (e) Balance sheet and owner’s equity statement.
(c) Income statement. (f) Balance sheet.
LO4 BT: C Difficulty: Easy TOT: 2 min. AACSB: None AICPA FC: Reporting
12. No, this treatment is not proper. While the transaction does involve a receipt of cash, it does not
represent revenues. Revenues are the gross increase in owner’s equity resulting from business
activities entered into for the purpose of earning income. This transaction is simply an additional
investment made by the owner in the business.
LO4 BT: C Difficulty: Medium TOT: 3 min. AACSB: None AICPA FC: Reporting
13. Yes. Net income does appear on the income statement—it is the result of subtracting expenses
from revenues. In addition, net income appears in the owner’s equity statement—it is shown as
an addition to the beginning-of-period capital. Indirectly, the net income of a company is also
included in the balance sheet. It is included in the capital account which appears in the owner’s
equity section of the balance sheet.
LO4 BT: C Difficulty: Medium TOT: 4 min. AACSB: None AICPA FC: Reporting
14. (a) Ending capital balance....................................................................................... $198,000
Less: Beginning capital balance......................................................................... 168,000
Net income......................................................................................................... $ 30,000
($198,000 – $168,000 = $30,000)
(End. cap. bal. – Beg. cap. bal. = Net inc.)
(b) Ending capital balance....................................................................................... $198,000
Less: Beginning capital balance......................................................................... 168,000
30,000
Deduct: Investment........................................................................................... 13,000
Net income......................................................................................................... $17,000
($198,000 – $168,000 – $13,000 = $17,000)
(End. cap. bal. – Beg. cap. bal. – Invest. = Net. inc.)
LO4 BT: AN Difficulty: Medium TOT: 4 min. AACSB: Analytic AICPA FC: Reporting
1-2 Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only)
,Questions Chapter 1 (Continued)
15. Total revenues ................................................................................................... $70,000
Total expenses................................................................................................... 40,000
Net income......................................................................................................... $30,000
($70,000 – $40,000 = $30,000)
(Tot. rev. – Tot. exp. = Net inc.)
LO4 BT: AP Difficulty: Medium TOT: 4 min. AACSB: Analytic AICPA FC: Reporting
16. Three job opportunities in public accounting include 1) auditing, 2) taxation and 3) management
consulting.
LO5 BT: AP Difficulty: Easy TOT: 1min. AACSB: None AICPA FC: Reporting
Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only) 1-3
, SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 1.1
Asset Liability Owner’s Equity
Cash Accounts payable Owner’s capital
Equipment Notes payable
Supplies Salaries and
Accounts receivable wages payable
LO4 BT: C Difficulty: Easy TOT: 4 min. AACSB: None AICPA FC: Reporting
BRIEF EXERCISE 1.2
BS (a) Notes payable
IS (b) Advertising expense
OE, BS (c) Owner’s capital
BS (d) Cash
IS (e) Service revenue
LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting
BRIEF EXERCISE 1.3
MENDOZA COMPANY
Balance Sheet
December 31, 2022
Assets
Cash................................................................................................. $ 49,000
Accounts receivable....................................................................... 72,500
Total assets ............................................................................. $121,500
Liabilities and Owner’s Equity
Liabilities
Accounts payable ................................................................... $ 90,000
Owner’s equity
Owner’s capital........................................................................ 31,500
Total liabilities and owner’s equity................................ $121,500
[$49,000 + $72,500 = $90,000 + $31,500]
[(Cash + Accts. rec.) = Accts. pay. + Owner’s cap.]
LO4 BT: AP Difficulty: Easy TOT: 4 min. AACSB: Analytic AICPA FC: Reporting
1-4 Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only)
,BRIEF EXERCISE 1.4
ARMANDA CO.
Income Statement
For the Year Ended December 31, 2022
Revenues
Service revenue...................................................... $63,600
Expenses
Salaries and wages expense................................. $29,500
Rent expense.......................................................... 10,400
Utilities expense..................................................... 3,100
Advertising expense.............................................. 1,800
Total expenses................................................ 44,800
Net income...................................................................... $18,800
[$63,600 – ($29,500 + $10,400 + $3,100 + $1,800) = $18,800
[Serv. rev. – (Sal. & wages exp. + Rent exp. + Util. exp. + Advert. exp.) = Net inc.]
ARMANDA CO.
Owner’s Equity Statement
For the Year Ended December 31, 2022
Owner’s capital, January 1............................................................... $48,000
Add: Net income.............................................................................. 18,800
66,800
Less: Drawings................................................................................. 6,000
Owner’s capital, December 31 ......................................................... $60,800
($48,000 + $18,800 - $6,000 = $60,800)
(Beg. owner’s cap. + Net inc. – Owner’s draw. = End. owner’s cap.)
LO4 BT: AP Difficulty: Medium TOT: 10 min. AACSB: Analytic AICPA FC: Reporting
BRIEF EXERCISE 1.5
OE (1) Drawings
IS (2) Rent revenue
IS (3) Advertising expense
OE (4) Owner investment
BS (5) Supplies
BS (6) Accounts payable
LO4 BT: C Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Reporting
Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only) 1-5
,BRIEF EXERCISE 1.6
Cash flows from operating activities............................................ $5,890
Cash flows from investing activities............................................. (3,500)
Cash flows from financing activities............................................. 1,400
Net change in cash......................................................................... $3,790
LO4 BT: AP Difficulty: Easy TOT: 5 min. AACSB: None AICPA FC: Reporting
1-6 Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only)
, SOLUTIONS TO DO IT! EXERCISES
DO IT! 1.1
1. False. The three steps in the accounting process are identification,
recording, and communication.
2. True.
3. False. Financial accounting provides reports to help investors and
creditors evaluate a company.
4. True.
5. True.
LO1 BT: K Difficulty: Easy TOT: 3 min. AACSB: None AICPA FC: Measurement Analysis and Interpretation
DO IT! 1.2
1. False. A business owned by two or more persons associated as partners
is a partnership.
2. True.
3. False. A manufacturing company converts raw materials into finished
goods to sell to customers.
4. True.
5. False. A department store is an example of a retail (merchandise)
company.
LO2 BT: K Difficulty: Easy TOT: 4 min. ACSB: None AICPA FC: Measurement Analysis and Interpretation
DO IT! 1.3
1. False. Congress passed the Sarbanes-Oxley Act to reduce unethical
behavior and decrease the likelihood of future corporate scandals.
2. False. The standards of conduct by which actions are judged as right
or wrong, honest or dishonest, fair or not fair, are ethics.
3. False. The primary accounting standard-setting body in the United
States is the Financial Accounting Standards Board (FASB).
4. True.
5. True.
LO3 BT: K Difficulty: Easy TOT: 4 min. ACSB: None AICPA FC: Measurement Analysis and Interpretation
Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only) 1-7
, DO IT! 1.4
(a) The total assets are $49,000, comprised of Cash $6,500, Accounts
Receivable $13,500, and Equipment $29,000.
($6,500 + $13,500 + $29,000 = $49,000)
(Cash + Accts. rec. + Equip. = Tot. assets)
(b) Net income is $20,500, computed as follows:
Revenues
Service revenue................................................... $53,500
Expenses
Salaries and wages expense.............................. $16,500
Rent expense....................................................... 10,500
Advertising expense........................................... 6,000
Total expenses............................................ 33,000
Net income .................................................................. $20,500
[$53,500 – ($16,500 + $10,500 + $6,000) = $20,500]
[Serv. rev. – (Sal. & wages exp. + Rent exp. + Advert. exp) = Net inc.]
(c) The ending owner’s equity balance of Kirby Company is $21,000. By
rewriting the sections as they appear on the balance sheet, we can
compute Owner’s Equity as Assets minus Liabilities, as follows:
Total assets [as computed in (a)].............................. $49,000
Less: Liabilities
Notes payable...................................................... $25,000
Accounts payable ............................................... 3,000 28,000
Owner’s equity............................................................ $21,000
Note that it is not possible to determine the company’s owner’s equity in
any other way, because the beginning balance for owner’s equity is not
provided.
[$49,000 – ($25,000 + $3,000) = $21,000]
[Tot. assets – (Notes pay. + Accts. pay.) = Owner’s equity]
1-8 Copyright © 2019 WILEY Weygandt, College Accounting, 1/e, Solutions Manual (For Instructor Use Only)
