Event number
Stockholder's Equity
Assets = Liabilities + Common Stock + Retained Earnings
1. I I NA NA
2.
3.
4.
5.
6.
Event number
Stockholder's Equity
Assets = Liabilities + Common Stock + Retained Earnings
1. I I NA NA
2. D NA NA D
3. I NA I NA
4. I NA NA I
5. D D NA NA
6. D NA NA D
References
Essay Difficulty: 2 Medium Learning Objective: 01-04 Show how business events affect the
accounting equation.
Indicate how each of the following transactions affect assets by entering + for increase, − for decrease, or NA if total assets are not affected. Enter only one
item for each answer.
_______ 1) Issued stock to investors
_______ 2) Borrowed cash from the bank
_______ 3) Provided services for cash
_______ 4) Paid operating expenses
_______ 5) Purchased land for cash
_______ 6) Paid cash dividend to the stockholders
_______ 7) Repaid the bank loan
1) +, 2) +, 3) +, 4) −, 5) NA, 6) −, 7) −
References
Essay Difficulty: 2 Medium Learning Objective: 01-04 Show how business events affect the
accounting equation.
49.
Award: 10.00 points
50.
Award: 10.00 points
Classify each of the following events as an asset source (AS), asset use (AU), asset exchange (AX), or not applicable (NA).
_______ 1) Borrowed cash from the bank.
_______ 2) Issued stock for cash.
_______ 3) Invested cash in the common stock of another company.
_______ 4) Performed services and collected cash.
_______ 5) Paid cash for operating expense.
_______ 6) Purchased equipment for cash.
_______ 7) Paid dividends to stockholders.
_______ 8) Repaid the bank loan with cash.
1) AS 2) AS 3) AX 4) AS 5) AU 6) AX 7) AU 8) AU
References
Essay Difficulty: 2 Medium Learning Objective: 01-06 Classify business events as asset source,
use, or exchange transactions.
Grimes Corporation reports the following cash transactions for the year ending December 31, Year 1, its first year of operation:
1. Issued common stock for $35,000 cash
2. Borrowed $25,000 from a local bank
3. Purchased land for $40,000 cash
4. Provided services to clients for $38,000 cash
5. Paid operating expenses of $30,500
6. Paid $2,000 cash dividends to stockholders
Required:
a. What are the total assets for Grimes Corporation at December 31, Year 1?
b. Prepare an income statement for Year 1.
a. Total assets = Cash from issuance of common stock of $35,000 + Cash from borrowing of $25,000 + Cash from clients of $38,000 − Cash paid for operating
expenses of $30,500 Cash dividend of $2,000 = $65,500
b.
Grimes Corporation
Income Statement
For the Year Ended December 31, Year 1
Revenue $38,000
Operating expenses (30,500)
Net income $ 7,500
References
Essay Learning Objective: 01-04 Show
how business events affect the
accounting equation.
Difficulty: 2 Medium Learning Objective: 01-07
Prepare an income statement, a
statement of changes in
stockholders equity, and a
balance sheet.
51.
Award: 10.00 points
Young Company reported the following balance sheet for the end of Year 1:
Young Company
Balance Sheet
For the Year Ended December 31, Year 1
Assets:
Cash $58,800
Land 25,500
Total assets $84,300
Liabilities:
Notes payable $18,000
Stockholders' equity:
Common stock 50,000
Retained earnings 16,300
Total stockholders' equity 66,300
Total liabilities and stockholders' equity $84,300
During Year 2, Young reported the following transactions:
Repaid $9,000 to a local bank on a note payable
Provided services to clients for $27,400 cash
Paid operating expenses of $20,200
Paid $4,500 cash dividends to stockholders
Required:
Prepare Young Company's balance sheet as of December 31, Year 2.
Young Company
Balance Sheet
As of December 31, Year 2
Assets:
Cash $52,500
Land 25,500
Total assets $78,000
Liabilities:
Notes payable $ 9,000
Stockholders' equity: