SOLUTION MANUAL
HORNGREN’S ACCOUNTING: FINANCIAL CHAPTERS
, TABLE OF CONTENTS
1. Accounting and the Business Environment
2. Recording Business Transactions
3. The Adjusting Process
4. Completing the Accounting Cycle
5. Merchandising Operations
6. Merchandise Inventory
7. Accounting Information Systems
8. Internal Control and Cash
9. Receivables
10. Plant Assets, Natural Resources, and Intangibles
11. Current Liabilities and Payroll
12. Partnerships
13. Corporations
14. Long-Term Liabilities
15. Investments
16. The Statement of Cash Flows
17. Financial Statement Analysis
,Solution Manual For
Horngren's Accounting The Financial Chapters,
14th Edition Nobles
Chapter 1-17
Chapter 1
Accounting And The Business Environment
Review Questions
Accounting Is The Information System That Measures Business Activities, Processes The
Information Into Reports, And Communicates The Results To Decision Makers. Accounting Is
The Language Of Business.
Financial Accounting Provides Information For External Decision Makers, Such As Outside
Investors, Lenders, Customers, And The Federal Government. Managerial Accounting Focuses On
Information For Internal Decision Makers, Such As The Company’s Managers And Employees.
Individuals Use Accounting Information To Help Them Manage Their Money, Evaluate A New
Job, And Better Decide Whether They Can Afford To Make A New Purchase. Business Owners
Use Accounting Information To Set Goals, Measure Progress Toward Those Goals, And Make
Adjustments When Needed. Investors Use Accounting Information To Help Them Decide Whether
Or Not A Company Is A Good Investment And Once They Have Invested, They Use A
Company’s Financial Statements To Analyze How Their Investment Is Performing. Creditors Use
Accounting Information To Decide Whether To Lend Money To A Business And To Evaluate A
Company’s Ability To Make The Loan Payments. Taxing Authorities Use Accounting Information
To Calculate The Amount Of Income Tax That A Company Has To Pay.
Certified Public Accountants (Cpas) Are Licensed Professional Accountants Who Serve The
General Public. They Work For Public Accounting Firms, Businesses, Government, Or
Educational Institutions. A Chartered Global Management Accountant (CGMA) Is An Accountant
Who Has Advanced Knowledge In Finance, Operations, Strategy, And Management. Certified
Management Accountants (Cmas) Specialize In Accounting And Financial Management
Knowledge. They Work For A Single Company. Certified Financial Planners (Cfps) Work With
Individuals To Help Them Budget, Plan For Retirement, Save For Education, And Manage Their
Finances.
The FASB Oversees The Creation And Governance Of Accounting Standards. They Work
With Governmental Regulatory Agencies, Congressionally Created Groups, And Private
Groups.
The Guidelines For Accounting Information Are Called GAAP. It Is The Main U.S. Accounting
Rule Book And Is Currently Created And Governed By The FASB. Investors And Lenders
Must Have Information That Is Relevant And Has Faithful Representation In Order To Make
Decisions And GAAP Provides The Framework For This Financial Reporting.
©2024 Pearson Education, Inc. 1-1
,A Sole Proprietorship Has A Single Owner, Terminates Upon The Owner’s Death Or Choice, The
Owner Has Personal Liability For The Business’s Debts, And It Is Not A Separate Tax Entity. A
Partnership Has Two Or More Owners, Terminates At Partner’s Choice Or Death, The Partners
Have Personal Liability, And It Is Not A Separate Tax Entity. A Corporation Is A Separate Legal
Entity, Has One Or More Owners, Has Indefinite Life, The Stockholders Are Not Personally Liable
For The Business’s Debts, And It Is A Separate Tax Entity. A Limited-Liability Company Has One
Or More Members And Each Is Only Liable For His Or Her Own Actions, Has An Indefinite Life,
And Is Not A Separate Tax Entity.
The Land Should Be Recorded At $5,000. The Cost Principle States That Assets Should Be
Recorded At Their Historical Cost.
The Going Concern Assumption Assumes That The Entity Will Remain In Business For The
Foreseeable Future And Long Enough To Use Existing Resources For Their Intended Purpose.
The Faithful Representation Concept States That Accounting Information Should Be Complete,
Neutral, And Free From Material Error.
The Monetary Unit Assumption States That Items On The Financial Statements Should Be
Measured In Terms Of A Monetary Unit.
The IASB Is The Organization That Develops And Creates IFRS Which Are A Set Of Global
Accounting Standards That Would Be Used Around The World.
Assets = Liabilities + Equity. Assets Are Economic Resources That Are Expected To Benefit The
Business In The Future. They Are Things Of Value That A Business Owns Or Has Control Of.
Liabilities Are Debts That Are Owed To Creditors. They Are One Source Of Claims Against
Assets. Equity Is The Other Source Of Claims Against Assets. Equity Is The Owner’s Claims
Against Assets And Is The Amount Of Assets That Is Left Over After The Company Has Paid Its
Liabilities. It Represents The Net Worth Of The Business.
Equity Increases With Owner Contributions And Revenues. Equity Decreases With Expenses And
Owner Withdrawals.
Revenues – Expenses = Net Income. Revenues Are Earnings Resulting From Delivering
Goods Or Services To Customers. Expenses Are The Cost Of Selling Goods Or Service.
Step 1: Identify The Accounts And The Account Type. Step 2: Decide If Each Account Increases Or
Decreases. Step 3: Determine If The Accounting Equation Is In Balance.
Income Statement – Shows The Difference Between An Entity’s Revenues And Expenses And
Reports The Net Income Or Net Loss For A Specific Period.
Statement Of Owner’s Equity – Shows The Changes In Owner’s Capital For A Specific Period
Including Owner Contributions, Net Income (Loss) And Owner Withdrawals Balance Sheet –
Shows The Assets, Liabilities, And Owner’s Equity Of The Business As Of A Specific Date.
Statement Of Cash Flows – Shows A Business’s Cash Receipts And Cash Payments For A Specific
Period.
Return On Assets = Net Income / Average Total Assets. ROA Measures How Profitably A
Company Uses Its Assets.
© 2024 Pearson Education, Inc. 1-2
,Short Exercises
S-F:1-1
A. FA E. MA
B. FA F. FA
C. FA G. MA
D. MA H. FA
S-F:1-2
The Financial Accounting Standards Board Governs The Majority Of Guidelines, Called Generally
Accepted Accounting Principles (GAAP), That The CPA Will Use To Prepare Financial Statements For
Wholly Shirts.
S-F:1-3
Chloe’s Needs Will Best Be Met By Organizing A Corporation Since A Corporation Has An Unlimited
Life And Is A Separate Tax Entity. In Addition, The Owners (Stockholders) Have Limited Liability.
Chloe Could Also Consider A Limited Liability Company (LLC) As An Option. A LLC Meets Two Of
The Three Criteria. It Has An Unlimited Life And Limited Liability For The Owner. However, A LLC
Is Not A Separate Tax Entity.
S-F:1-4
Advantages:
Easy To Organize.
Unification Of Ownership And Management.
Less Government Regulation.
Owner Has More Control Over Business.
Disadvantages:
The Owner Pays Taxes On The Entity’s Earnings Since It Is Not A Separate Tax Entity.
No Continuous Life Or Transferability Of Ownership.
Unlimited Liability Of Owner For Business’s Debts.
S-F:1-5
A. The Economic Entity Assumption
B. The Cost Principle.
C. The Monetary Unit Assumption.
D. The Going Concern Assumption.
© 2024 Pearson Education, Inc. 1-3
,S-F:1-6
Requirement 1
Thompson Handyman Services Has Equity Of $9,350.
Assets = Liabilities + Equity
$18,400 = $9,050 + ?
$18,400 = $9,050 + $9,350
Requirement 2
Thompson Handyman Services Has Liabilities Of $17,200.
Assets = Liabilities + Equity
$18,400 + $4,300 = ? + $9,350 – $3,850
$22,700 = $17,200 + $5,500
S-F:1-7
Requirement 1
ASSETS = LIABILITIES + EQUITY
Roland, Roland,
+ Capital
– Withdrawals + Revenues – Expenses
$45,800 = $17,220 + $27,460 – $6,500 + $8,850 – ?
$45,800 = $17,220 + $27,460 – $6,500 + $8,850 – $1,230
Requirement 2
Roland’s Overhead Doors Reported Net Income Of $7,620. Net Income = Revenues ($8,850) –
Expenses ($1,230)
S-F:1-8
A. L F. E
B. A G. A
C. E H. E
D. A I. A
E. E J. E
© 2024 Pearson Education, Inc. 1-4
,S-F:1-9
Increase Asset (Cash); Increase Equity (Service Revenue)
Decrease Asset (Cash); Decrease Equity (Salaries Expense)
Increase Asset (Cash); Increase Equity (Martin, Capital)
Increase Asset (Accounts Receivable); Increase Equity (Service Revenue)
Increase Liability (Accounts Payable); Decrease Equity (Utility Expense)
Decrease Asset (Cash); Decrease Equity (Martin, Withdrawals)
S-F:1-10
Increase Asset (Cash); Increase Equity (Gibson, Capital)
Increase Asset (Equipment); Increase Liability (Accounts Payable)
Increase Asset (Office Supplies); Decrease Asset (Cash)
Increase Asset (Cash); Increase Equity (Service Revenue)
Decrease Asset (Cash); Decrease Equity (Wages Expense)
Decrease Asset (Cash); Decrease Equity (Gibson, Withdrawals)
Increase Asset (Accounts Receivable); Increase Equity (Service Revenue)
Decrease Asset (Cash); Decrease Equity (Rent Expense)
Increase Liability (Accounts Payable); Decrease Equity (Utilities Expense)
S-F:1-11
A. B F. I
B. B, C G. B
C. B H. OE
D. B I. B
E. I J. I
S-F:1-12
CENTERPIECE ARRANGEMENTS
Income Statement
Year Ended December 31, 2024
Revenue:
Service Revenue $ 70,000
Expenses:
Salaries Expense $ 46,000
Rent Expense 16,000
Insurance Expense 4,500
Utilities Expense 1,400
Total Expenses 67,900
Net Income $ 2,100
© 2024 Pearson Education, Inc. 1-5
,S-F:1-13
CENTERPIECE ARRANGEMENTS
Statement Of Owner’s Equity
Year Ended December 31, 2024
Right, Capital, January 1, 2024 $ 9,000
Owner Contribution 5,100
Net Income For The Year 2,100
16,200
Owner Withdrawal (4,800)
Right, Capital, December 31, 2024 $ 11,400
S-F:1-14
CENTERPIECE ARRANGEMENTS
Balance Sheet
December 31, 2024
Assets Liabilities
Cash $ 7,200 Accounts Payable $ 17,600
Accounts Receivable 8,000
Office Supplies 1,700 Owner’s Equity
Equipment 12,100 Right, Capital 11,400
Total Assets $ 29,000 Total Liabilities And Owner’s Equity $ 29,000
S-F:1-15
POLK STREET HOMES
Statement Of Cash Flows
Month Ended July 31, 2024
Cash Flows From Operating Activities:
Receipts:
Collections From Customers $ 25,000
Payments:
To Employees $ (1,500)
To Suppliers (2,500) (4,000)
Net Cash Provided By Operating Activities 21,000
Cash Flows From Investing Activities:
Purchase Of Equipment (25,000)
Net Cash Used By Investing Activities (25,000)
Cash Flows From Financing Activities:
Owner Contribution 13,000
Owner Withdrawal (4,000)
© 2024 Pearson Education, Inc. 1-6
, Net Cash Provided By Financing 9,000
Activities Net Increase In Cash 5,000
Cash Balance, July 1, 2024 14,000
Cash Balance, July 31, 2024 $ 19,000
S-F:1-16
Return On Assets = Net Income / Average Total Assets
$50,880 / (($362,000 + $486,000) / 2)
$50,880 / $424,000
12%
Exercises
E-F:1-17
A. E E. E
B. I F. I
C. E G. I
D. E H. E
E-F:1-18
1. D 6. F
2. E 7. B
3. G 8. C
4. A 9. J
10.
5. I H
E-F:1-19
1. E 7. D
2. A 8. C
3. I 9. G
10.
4. F H
11.
5. J K
6. B
E-F:1-20
Assets Liabilities Equity
Hair Styles $ 72,000 $ 36,000 $ 36,000
Style Cuts 90,000 42,000 48,000
Your Basket 101,000 68,000 33,000
, E-F:1-21
A. B. C.
Owner’s Equity, May 31, 2024 $ 56,000 $ 56,000 $ 56,000
($122,000 – $66,000)
Owner Contribution 10,000 0 12,500
Net Income For The
Month 77,000 90,000 104,500
143,000 146,000 173,000
Owner Withdrawal 0 (3,000) (30,000)
Owner’s Equity, June 30, 2024 $ 143,000 $ 143,000 $ 143,000
($287,000 – $144,000)
E-F:1-22
Requirement 1
Assets = Liabilities + Equity
Beginning Of 2024 $19,000 = $14,000 + ?
$19,000 = $14,000 + $5,000
End Of 2024 $12,000 = $9,000 + ?
$12,000 = $9,000 + $3,000
Owner’s Equity Decreased In 2024 By $2,000 ($5,000 – $3,000).
Requirement 2
Increase Through Owner’s Contributions.
Increase Through Net Income.
Decrease Through Owner’s Withdrawals.
Decrease Through Net Loss.
E-F:1-23
Requirement 1
Revenues – Expenses = Net Income
$30,000 – $15,000 = $15,000
Requirement 2
Flowing Rivers Spa’s Equity Increased By $15,000 ($29,000 - $14,000) Or The Amount Of The Net
Income.
Assets = Liabilities + Equity
Beginning Of 2024 $28,000 = $14,000 + ?
$28,000 = $14,000 + $14,000
Ending Of 2024 $43,000 = $14,000 + ?
© 2024 Pearson Education, Inc. 1-8
HORNGREN’S ACCOUNTING: FINANCIAL CHAPTERS
, TABLE OF CONTENTS
1. Accounting and the Business Environment
2. Recording Business Transactions
3. The Adjusting Process
4. Completing the Accounting Cycle
5. Merchandising Operations
6. Merchandise Inventory
7. Accounting Information Systems
8. Internal Control and Cash
9. Receivables
10. Plant Assets, Natural Resources, and Intangibles
11. Current Liabilities and Payroll
12. Partnerships
13. Corporations
14. Long-Term Liabilities
15. Investments
16. The Statement of Cash Flows
17. Financial Statement Analysis
,Solution Manual For
Horngren's Accounting The Financial Chapters,
14th Edition Nobles
Chapter 1-17
Chapter 1
Accounting And The Business Environment
Review Questions
Accounting Is The Information System That Measures Business Activities, Processes The
Information Into Reports, And Communicates The Results To Decision Makers. Accounting Is
The Language Of Business.
Financial Accounting Provides Information For External Decision Makers, Such As Outside
Investors, Lenders, Customers, And The Federal Government. Managerial Accounting Focuses On
Information For Internal Decision Makers, Such As The Company’s Managers And Employees.
Individuals Use Accounting Information To Help Them Manage Their Money, Evaluate A New
Job, And Better Decide Whether They Can Afford To Make A New Purchase. Business Owners
Use Accounting Information To Set Goals, Measure Progress Toward Those Goals, And Make
Adjustments When Needed. Investors Use Accounting Information To Help Them Decide Whether
Or Not A Company Is A Good Investment And Once They Have Invested, They Use A
Company’s Financial Statements To Analyze How Their Investment Is Performing. Creditors Use
Accounting Information To Decide Whether To Lend Money To A Business And To Evaluate A
Company’s Ability To Make The Loan Payments. Taxing Authorities Use Accounting Information
To Calculate The Amount Of Income Tax That A Company Has To Pay.
Certified Public Accountants (Cpas) Are Licensed Professional Accountants Who Serve The
General Public. They Work For Public Accounting Firms, Businesses, Government, Or
Educational Institutions. A Chartered Global Management Accountant (CGMA) Is An Accountant
Who Has Advanced Knowledge In Finance, Operations, Strategy, And Management. Certified
Management Accountants (Cmas) Specialize In Accounting And Financial Management
Knowledge. They Work For A Single Company. Certified Financial Planners (Cfps) Work With
Individuals To Help Them Budget, Plan For Retirement, Save For Education, And Manage Their
Finances.
The FASB Oversees The Creation And Governance Of Accounting Standards. They Work
With Governmental Regulatory Agencies, Congressionally Created Groups, And Private
Groups.
The Guidelines For Accounting Information Are Called GAAP. It Is The Main U.S. Accounting
Rule Book And Is Currently Created And Governed By The FASB. Investors And Lenders
Must Have Information That Is Relevant And Has Faithful Representation In Order To Make
Decisions And GAAP Provides The Framework For This Financial Reporting.
©2024 Pearson Education, Inc. 1-1
,A Sole Proprietorship Has A Single Owner, Terminates Upon The Owner’s Death Or Choice, The
Owner Has Personal Liability For The Business’s Debts, And It Is Not A Separate Tax Entity. A
Partnership Has Two Or More Owners, Terminates At Partner’s Choice Or Death, The Partners
Have Personal Liability, And It Is Not A Separate Tax Entity. A Corporation Is A Separate Legal
Entity, Has One Or More Owners, Has Indefinite Life, The Stockholders Are Not Personally Liable
For The Business’s Debts, And It Is A Separate Tax Entity. A Limited-Liability Company Has One
Or More Members And Each Is Only Liable For His Or Her Own Actions, Has An Indefinite Life,
And Is Not A Separate Tax Entity.
The Land Should Be Recorded At $5,000. The Cost Principle States That Assets Should Be
Recorded At Their Historical Cost.
The Going Concern Assumption Assumes That The Entity Will Remain In Business For The
Foreseeable Future And Long Enough To Use Existing Resources For Their Intended Purpose.
The Faithful Representation Concept States That Accounting Information Should Be Complete,
Neutral, And Free From Material Error.
The Monetary Unit Assumption States That Items On The Financial Statements Should Be
Measured In Terms Of A Monetary Unit.
The IASB Is The Organization That Develops And Creates IFRS Which Are A Set Of Global
Accounting Standards That Would Be Used Around The World.
Assets = Liabilities + Equity. Assets Are Economic Resources That Are Expected To Benefit The
Business In The Future. They Are Things Of Value That A Business Owns Or Has Control Of.
Liabilities Are Debts That Are Owed To Creditors. They Are One Source Of Claims Against
Assets. Equity Is The Other Source Of Claims Against Assets. Equity Is The Owner’s Claims
Against Assets And Is The Amount Of Assets That Is Left Over After The Company Has Paid Its
Liabilities. It Represents The Net Worth Of The Business.
Equity Increases With Owner Contributions And Revenues. Equity Decreases With Expenses And
Owner Withdrawals.
Revenues – Expenses = Net Income. Revenues Are Earnings Resulting From Delivering
Goods Or Services To Customers. Expenses Are The Cost Of Selling Goods Or Service.
Step 1: Identify The Accounts And The Account Type. Step 2: Decide If Each Account Increases Or
Decreases. Step 3: Determine If The Accounting Equation Is In Balance.
Income Statement – Shows The Difference Between An Entity’s Revenues And Expenses And
Reports The Net Income Or Net Loss For A Specific Period.
Statement Of Owner’s Equity – Shows The Changes In Owner’s Capital For A Specific Period
Including Owner Contributions, Net Income (Loss) And Owner Withdrawals Balance Sheet –
Shows The Assets, Liabilities, And Owner’s Equity Of The Business As Of A Specific Date.
Statement Of Cash Flows – Shows A Business’s Cash Receipts And Cash Payments For A Specific
Period.
Return On Assets = Net Income / Average Total Assets. ROA Measures How Profitably A
Company Uses Its Assets.
© 2024 Pearson Education, Inc. 1-2
,Short Exercises
S-F:1-1
A. FA E. MA
B. FA F. FA
C. FA G. MA
D. MA H. FA
S-F:1-2
The Financial Accounting Standards Board Governs The Majority Of Guidelines, Called Generally
Accepted Accounting Principles (GAAP), That The CPA Will Use To Prepare Financial Statements For
Wholly Shirts.
S-F:1-3
Chloe’s Needs Will Best Be Met By Organizing A Corporation Since A Corporation Has An Unlimited
Life And Is A Separate Tax Entity. In Addition, The Owners (Stockholders) Have Limited Liability.
Chloe Could Also Consider A Limited Liability Company (LLC) As An Option. A LLC Meets Two Of
The Three Criteria. It Has An Unlimited Life And Limited Liability For The Owner. However, A LLC
Is Not A Separate Tax Entity.
S-F:1-4
Advantages:
Easy To Organize.
Unification Of Ownership And Management.
Less Government Regulation.
Owner Has More Control Over Business.
Disadvantages:
The Owner Pays Taxes On The Entity’s Earnings Since It Is Not A Separate Tax Entity.
No Continuous Life Or Transferability Of Ownership.
Unlimited Liability Of Owner For Business’s Debts.
S-F:1-5
A. The Economic Entity Assumption
B. The Cost Principle.
C. The Monetary Unit Assumption.
D. The Going Concern Assumption.
© 2024 Pearson Education, Inc. 1-3
,S-F:1-6
Requirement 1
Thompson Handyman Services Has Equity Of $9,350.
Assets = Liabilities + Equity
$18,400 = $9,050 + ?
$18,400 = $9,050 + $9,350
Requirement 2
Thompson Handyman Services Has Liabilities Of $17,200.
Assets = Liabilities + Equity
$18,400 + $4,300 = ? + $9,350 – $3,850
$22,700 = $17,200 + $5,500
S-F:1-7
Requirement 1
ASSETS = LIABILITIES + EQUITY
Roland, Roland,
+ Capital
– Withdrawals + Revenues – Expenses
$45,800 = $17,220 + $27,460 – $6,500 + $8,850 – ?
$45,800 = $17,220 + $27,460 – $6,500 + $8,850 – $1,230
Requirement 2
Roland’s Overhead Doors Reported Net Income Of $7,620. Net Income = Revenues ($8,850) –
Expenses ($1,230)
S-F:1-8
A. L F. E
B. A G. A
C. E H. E
D. A I. A
E. E J. E
© 2024 Pearson Education, Inc. 1-4
,S-F:1-9
Increase Asset (Cash); Increase Equity (Service Revenue)
Decrease Asset (Cash); Decrease Equity (Salaries Expense)
Increase Asset (Cash); Increase Equity (Martin, Capital)
Increase Asset (Accounts Receivable); Increase Equity (Service Revenue)
Increase Liability (Accounts Payable); Decrease Equity (Utility Expense)
Decrease Asset (Cash); Decrease Equity (Martin, Withdrawals)
S-F:1-10
Increase Asset (Cash); Increase Equity (Gibson, Capital)
Increase Asset (Equipment); Increase Liability (Accounts Payable)
Increase Asset (Office Supplies); Decrease Asset (Cash)
Increase Asset (Cash); Increase Equity (Service Revenue)
Decrease Asset (Cash); Decrease Equity (Wages Expense)
Decrease Asset (Cash); Decrease Equity (Gibson, Withdrawals)
Increase Asset (Accounts Receivable); Increase Equity (Service Revenue)
Decrease Asset (Cash); Decrease Equity (Rent Expense)
Increase Liability (Accounts Payable); Decrease Equity (Utilities Expense)
S-F:1-11
A. B F. I
B. B, C G. B
C. B H. OE
D. B I. B
E. I J. I
S-F:1-12
CENTERPIECE ARRANGEMENTS
Income Statement
Year Ended December 31, 2024
Revenue:
Service Revenue $ 70,000
Expenses:
Salaries Expense $ 46,000
Rent Expense 16,000
Insurance Expense 4,500
Utilities Expense 1,400
Total Expenses 67,900
Net Income $ 2,100
© 2024 Pearson Education, Inc. 1-5
,S-F:1-13
CENTERPIECE ARRANGEMENTS
Statement Of Owner’s Equity
Year Ended December 31, 2024
Right, Capital, January 1, 2024 $ 9,000
Owner Contribution 5,100
Net Income For The Year 2,100
16,200
Owner Withdrawal (4,800)
Right, Capital, December 31, 2024 $ 11,400
S-F:1-14
CENTERPIECE ARRANGEMENTS
Balance Sheet
December 31, 2024
Assets Liabilities
Cash $ 7,200 Accounts Payable $ 17,600
Accounts Receivable 8,000
Office Supplies 1,700 Owner’s Equity
Equipment 12,100 Right, Capital 11,400
Total Assets $ 29,000 Total Liabilities And Owner’s Equity $ 29,000
S-F:1-15
POLK STREET HOMES
Statement Of Cash Flows
Month Ended July 31, 2024
Cash Flows From Operating Activities:
Receipts:
Collections From Customers $ 25,000
Payments:
To Employees $ (1,500)
To Suppliers (2,500) (4,000)
Net Cash Provided By Operating Activities 21,000
Cash Flows From Investing Activities:
Purchase Of Equipment (25,000)
Net Cash Used By Investing Activities (25,000)
Cash Flows From Financing Activities:
Owner Contribution 13,000
Owner Withdrawal (4,000)
© 2024 Pearson Education, Inc. 1-6
, Net Cash Provided By Financing 9,000
Activities Net Increase In Cash 5,000
Cash Balance, July 1, 2024 14,000
Cash Balance, July 31, 2024 $ 19,000
S-F:1-16
Return On Assets = Net Income / Average Total Assets
$50,880 / (($362,000 + $486,000) / 2)
$50,880 / $424,000
12%
Exercises
E-F:1-17
A. E E. E
B. I F. I
C. E G. I
D. E H. E
E-F:1-18
1. D 6. F
2. E 7. B
3. G 8. C
4. A 9. J
10.
5. I H
E-F:1-19
1. E 7. D
2. A 8. C
3. I 9. G
10.
4. F H
11.
5. J K
6. B
E-F:1-20
Assets Liabilities Equity
Hair Styles $ 72,000 $ 36,000 $ 36,000
Style Cuts 90,000 42,000 48,000
Your Basket 101,000 68,000 33,000
, E-F:1-21
A. B. C.
Owner’s Equity, May 31, 2024 $ 56,000 $ 56,000 $ 56,000
($122,000 – $66,000)
Owner Contribution 10,000 0 12,500
Net Income For The
Month 77,000 90,000 104,500
143,000 146,000 173,000
Owner Withdrawal 0 (3,000) (30,000)
Owner’s Equity, June 30, 2024 $ 143,000 $ 143,000 $ 143,000
($287,000 – $144,000)
E-F:1-22
Requirement 1
Assets = Liabilities + Equity
Beginning Of 2024 $19,000 = $14,000 + ?
$19,000 = $14,000 + $5,000
End Of 2024 $12,000 = $9,000 + ?
$12,000 = $9,000 + $3,000
Owner’s Equity Decreased In 2024 By $2,000 ($5,000 – $3,000).
Requirement 2
Increase Through Owner’s Contributions.
Increase Through Net Income.
Decrease Through Owner’s Withdrawals.
Decrease Through Net Loss.
E-F:1-23
Requirement 1
Revenues – Expenses = Net Income
$30,000 – $15,000 = $15,000
Requirement 2
Flowing Rivers Spa’s Equity Increased By $15,000 ($29,000 - $14,000) Or The Amount Of The Net
Income.
Assets = Liabilities + Equity
Beginning Of 2024 $28,000 = $14,000 + ?
$28,000 = $14,000 + $14,000
Ending Of 2024 $43,000 = $14,000 + ?
© 2024 Pearson Education, Inc. 1-8
