Assignments
Exercise 1: Missing information in the accounting equation
Calculate the missing amounts in the following table.
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Stockholders' Equity
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Company
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Assets
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=
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Liabilities
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+
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Common Stock
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+
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Retained Earnings
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A
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$ ?
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$30,000
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$50,000
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$62,000
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B
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50,000
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?
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10,000
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25,000
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C
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85,000
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20,000
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?
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40,000
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D
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215,000
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60,000
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100,000
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?
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Exercise 2: Effect of transactions on general ledger accounts
At the beginning of 2014, Foster Corp.'s accounting records had the following general ledger accounts and balances.
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FOSTER CORP. Accounting Equation
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Event
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Assets
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=
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Liabilities
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+
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Stockholder's Equity
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Acct. Titles for RE
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Cash
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Land
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Note Payable
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Common Stock
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Retained Earnings
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Balalnce 1/1/2014
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30,000
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16,000
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10,000
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20,000
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16,000
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Foster Corp. completed the following transactions during 2014:
1. Purchased land for $20,000 cash.
2. Acquired $10,000 cash from the issue of common stock.
3. Received $90,000 cash for providing services to customers.
4. Paid cash operating expenses of $65,000.
5. Borrowed $20,000 cash from the bank.
6. Paid a $5,000 cash dividend to the stockholders.
7. Determined that the market value of the land purchased in event 1 is $30,000.
Required
a. Record the transactions in the appropriate general ledger accounts. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide the appropriate titles for these accounts in the last column of the table.
b. As of December 31, 2014, determine the total amount of assets, liabilities, and stockholder's equity and present this information in the form of an accounting equation.
c. What is the amount of total assets, liabilities, and stockholders' equity as of January 1, 2015?
Exercise 3: Preparing financial statements
Carolina Company experienced the following events during 2014.
1. Acquired $50,000 cash from the issue of common stock.
2. Paid $15,000 cash to purchase land.
3. Borrowed $25,000 cash.
4. Provided services for $60,000 cash.
5. Paid $12,000 cash for rent expense.
6. Paid $22,000 cash for other operating expenses.
7. Paid a $5,000 cash dividend to the stockholders.
8. Determined that the market value of the land purchased in Event 2 is now $16,500.
Required
a. The January 1, 2014, general ledger account balances are shown in the following accounting equation. Record the eight events in the appropriate general ledger accounts. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide the appropriate titles for these accounts in the last column of the table. The first event is shown as an example.
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CAROLINA COMPANY Accounting Equation
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Event
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Assets
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=
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Liabilities
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+
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Atockholder's Equity
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Acct. Titles for RE
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Cash
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Land
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Note Payable
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Common Stock
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Retained Earnings
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Balalnce 1/1/2014
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15,000
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10,000
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0
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20,000
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5,000
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500,000
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50,000
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Exercise 4: Retained earnings and the closing process
As of December 31, 2014, Blue Haven Company had total assets of $100,000, total liabilities of $30,000, and common stock of $50,000. The company's 2014 income statement contained revenue of $16,000 and expenses of $11,000. The 2014 statement of changes in stockholder's equity stated that $2,000 of dividends were paid to investors.
Required
a. Determine the before-closing balance in the Retained Earnings account on December 31, 2014.
b. Determine the after-closing balance in the Retained Earnings account on December 31, 2014.
c. Determine the before-closing balances in the Revenue, Expense, and Dividend accounts on December 31, 2014.
d. Determine the after-closing balances in the Revenue, Expense, and Dividend accounts on December 31, 2014.