Accounting Study

BRIEF EXERCISE 1-8

Beginning of Year: Assets = Liabilities + Shareholders’ equity

Beginning of Year: $800,000 = $500,000 + Shareholders’ equity

Beginning of Year: Shareholders’ equity = $300,000

(a)        ($800,000 + $150,000) = ($500,000 – $80,000) + Shareholders’ equity

        Shareholders’ equity = $530,000

(b)        Assets = ($500,000 – $50,000) + ($300,000 + $50,000 + $75,000)

        Assets = $875,000

(c)        ($800,000 – $80,000) = Liabilities + ($300,000 + $110,000)

        Liabilities = $310,000

BRIEF EXERCISE 1-10

(a)        A

(b)        L

(c)        A

(d)        A

(e)        SE

(f)        L

(g)        SE

(h)        A

EXERCISE 1-6

[1]         Total revenues – Profit = Total expenses

        $1,000,000 – $150,000 = $850,000

Note that item [2] cannot be solved until item [3] or [4] has been determined.

[2]        Beginning balance in shareholders' equity + Issue of shares + Profit – Dividends = Ending balance in shareholders’ equity

        $0 + $100,000 + $150,000 – Dividends = $200,000 (from [3])

        Dividends = $50,000