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Chapter 2 Analyzing Transactions: The Accounting Equation 3

© 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

CHAPTER 2

REVIEW QUESTIONS

• accounting equation
• business entity
• asset
• liability
• account payable
• owner’s equity
• business entity
• Owner’s Equity
• Liabilities
• Owner’s Equity
• expense
• net income
• net loss
• fiscal year
• drawing
• income statement
• statement of owner’s equity
• balance sheet
• liquidity

EXERCISES

Exercise 1 (a) $24,000 (b) $17,000 (c) $40,000 Exercise 2 (a) $90,000 (c) $60,000 (e) $50,000 (b) $35,000 (d) $55,000 (f) $10,000 Exercise 3 Net income = $7,000 Exercise 4 Owner’s equity = $13,120 Exercise 5 (a) $16,000 (b) $2,880 net income

• Chapter 2

© 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Exercise 6

OWNER’S

ASSETS = LIABILITIES + EQUITY

(a) 15,000 15,000 Bal. 15,000 15,000 (b) (4,000) 4,000 Bal. 15,000 15,000 (c) 9,000 9,000 Bal. 24,000 9,000 15,000 (d) (2,000) (2,000) Bal. 22,000

= 7,000 + 15,000

Exercise 7

ASSETS = LIABILITIES + OWNER’S EQUITY

(Items Owned) (Amts. Owed) (Owner’s Investment) (Earnings) Accounts Glen Ross, Glen Ross, Cash Payable Capital – Drawing + Revenues – Expenses Description Bal. 28,000 8,000 20,000 (a) 4,000 4,000 Service Fees (b) (1,200) 1,200 Rent Exp.(c) (200) 200 Utilities Exp.(d) (600) 600 Bal. 30,000

= 8,000 + 20,000 − 600 + 4,000 − 1,400

30,000 = 30,000

Chapter 2 Analyzing Transactions: The Accounting Equation 5

© 2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Exercise 8 1.

ASSETS = LIABILITIES + OWNER’S EQUITY

(Items Owned) (Amts. Owed) (Owner’s Investment) (Earnings)

Office Accounts J. Moore, J. Moore, Cash + Equipment = Payable + Capital – Drawing + Revenues – Expenses Description (a) 10,000 10,000 (b) 5,500 5,500 (c) 900 900 Service Fees (d) (6,000) 6,000 (e) 1,500 1,500 Service Fees (f) (800) 800 Rent Exp.(g) (75) 75 Phone. Exp.(h) (100) (100) (i) (500) 500 Bal. 4,925

+ 11,500 = 5,400 + 10,000 − 500 + 2,400 − 875

16,425 = 16,425

2.Total assets................................................................. $ 16,425 Total liabilities........................................................... $ 5,400 Owner’s equity........................................................... $ 11,025 Owner’s equity in excess of original investment....... $ 1,025 Total revenues............................................................ $ 2,400 Total expenses............................................................ $ 875 Net income................................................................. $ 1,525