BRIEF EXERCISES – ANSWERS BELOW
BE1-1. Use basic accounting equation.
(LO 3)
Presented below is the basic accounting equation. Determine the missing amounts.
| Assets | = | Liabilities | + | Owner’s Equity | |
| (a) | $90,000 | $50,000 | ? | ||
| (b) | ? | $44,000 | $70,000 | ||
| (c) | $94,000 | ? | $53,000 |
BE1-2. Use basic accounting equation.
(LO 3)
Given the accounting equation, answer each of the following questions.
(a) The liabilities of Weber Company are $120,000 and the owner’s equity is $232,000. What is the amount of Weber Company’s total assets?
(b) The total assets of Weber Company are $190,000 and its owner’s equity is $91,000. What is the amount of its total liabilities?
(c) The total assets of Weber Company are $800,000 and its liabilities are equal to one-half of its total assets. What is the amount of Weber Company’s owner’s equity?
BE1-3. Use basic accounting equation.
(LO 3)
At the beginning of the year, Gilles Company had total assets of $800,000 and total liabilities of $300,000. Answer the following questions.
(a) If total assets increased $150,000 during the year and total liabilities decreased $60,000, what is the amount of owner’s equity at the end of the year?
(b) During the year, total liabilities increased $100,000 and owner’s equity decreased $70,000. What is the amount of total assets at the end of the year?
(c) If total assets decreased $80,000 and owner’s equity increased $120,000 during the year, what is the amount of total liabilities at the end of the year?
BE1-4. Solve expanded accounting equation.
(LO 3)
Use the expanded accounting equation to answer each of the following questions.
(a) The liabilities of Kafka Company are $90,000. Owner’s capital is $150,000; drawings are $40,000; revenues, $450,000; and expenses, $320,000. What is the amount of Kafka Company’s total assets?
(b) The total assets of Rivera Company are $57,000. Owner’s capital is $25,000; drawings are $7,000; revenues, $52,000; and expenses, $35,000. What is the amount of the company’s total liabilities?
(c) The total assets of Alcorn Co. are $600,000 and its liabilities are equal to two-thirds of its total assets. What is the amount of Alcorn Co.’s owner’s equity?
BE1-5. Identify assets, liabilities, and owner’s equity.
(LO 3)
Indicate whether each of the following items is an asset (A), liability (L), or part of owner’s equity (OE).
- ________(a) Accounts receivable
- ________(b) Salaries and wages payable
- ________(c) Equipment
- ________(d) Supplies
- ________(e) Owner’s capital
- ________(f) Notes payable
BE1-6. Determine effect of transactions on basic accounting equation.
(LO 4)
Presented below are three business transactions. On a sheet of paper, list the letters (a), (b), and (c) with columns for assets, liabilities, and owner’s equity. For each column, indicate whether the transactions increased (+), decreased (−), or had no effect (NE) on assets, liabilities, and owner’s equity.
(a) Purchased supplies on account.
(b) Received cash for performing a service.
(c) Paid expenses in cash.
BE1-7. Determine effect of transactions on basic accounting equation.
(LO 4)
Follow the same format as in BE1-6. Determine the effect on assets, liabilities, and owner’s equity of the following three transactions.
(a) Invested cash in the business.
(b) Withdrawal of cash by owner.
(c) Received cash from a customer who had previously been billed for services performed.
BE1-8. Classify items affecting owner’s equity.
(LO 3)
Classify each of the following items as owner’s drawings (D), revenue (R), or expense (E).
- ________(a) Advertising expense
- ________(b) Service revenue
- ________(c) Insurance expense
- ________(d) Salaries and wages expense
- ________(e) Owner’s drawings
- ________(f) Rent revenue
- ________(g) Utilities expense
BE1-9. Determine effect of transactions on basic owner’s equity.
(LO 4)
Presented below are three transactions. Mark each transaction as affecting owner’s investment (I), owner’s drawings (D), revenue (R), expense (E), or not affecting owner’s equity (NOE).
- ________(a) Received cash for services performed
- ________(b) Paid cash to purchase equipment
- ________(c) Paid employee salaries
BE1-10. Prepare a balance sheet.
(LO 5)
In alphabetical order below are balance sheet items for Mendoza Company at December 31, 2017. Kathy Mendoza is the owner of Mendoza Company. Prepare a balance sheet, following the format of Illustration 1.9.
| Accounts payable | $90,000 |
| Accounts receivable | 72,500 |
| Cash | 49,000 |
| Owner’s capital | 31,500 |
BE1-11. Determine where items appear on financial statements.
(LO 5)
Indicate whether the following items would appear on the income statement (IS), balance sheet (BS), or owner’s equity statement (OE).
- ________(a) Notes payable
- ________(b) Advertising expense
- ________(c) Owner’s capital
- ________(d) Cash
- ________(e) Service revenue
SOLUTIONS
BRIEF EXERCISE 1-1
(a) $90,000 – $50,000 = $40,000 (Owner’s Equity).
(b) $44,000 + $70,000 = $114,000 (Assets).
(c) $94,000 – $53,000 = $41,000 (Liabilities).
BRIEF EXERCISE 1-2
(a) $120,000 + $232,000 = $352,000 (Total assets).
(b) $190,000 – $91,000 = $99,000 (Total liabilities).
(c) $800,000 – 0.5($800,000) = $400,000 (Owner’s equity).
BRIEF EXERCISE 1-3
(a) ($800,000 + $150,000) – ($300,000 – $60,000) = $710,000 (Owner’s equity).
(b) ($300,000 + $100,000) + ($800,000 – $300,000 – $70,000) = $830,000 (Assets).
(c) ($800,000 – $80,000) – ($800,000 – $300,000 + $120,000) = $100,000 (Liabilities).
BRIEF EXERCISE 1-4
BRIEF EXERCISE 1-5
A (a) Accounts receivable A (d) Supplies
L (b) Salaries and wages payable OE (e) Owner’s capital
A (c) Equipment L (f) Notes payable
BRIEF EXERCISE 1-6
| Assets | Liabilities | Owner’s Equity | ||||
| (a) | + | + | NE | |||
| (b) | + | NE | + | |||
| (c) | – | NE | – |
BRIEF EXERCISE 1-7
| Assets | Liabilities | Owner’s Equity | ||||
| (a) | + | NE | + | |||
| (b) | – | NE | – | |||
| (c) | NE | NE | NE |
BRIEF EXERCISE 1-8
E (a) Advertising expense D (e) Owner’s drawings
R (b) Service revenue R (f) Rent revenue
E (c) Insurance expense E (g) Utilities expense
E (d) Salaries and wages expense
BRIEF EXERCISE 1-9
R (a) Received cash for services performed
NOE (b) Paid cash to purchase equipment
E (c) Paid employee salaries
BRIEF EXERCISE 1-10
BRIEF EXERCISE 1-11
BS (a) Notes payable
IS (b) Advertising expense
OE, BS (c) Owner’s capital
BS (d) Cash
IS (e) Service revenue
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