Survey Of Accounting
Survey Of Accounting
4th Edition
ISBN: 9780077862374
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 1, Problem 7E

a.

To determine

Calculate the amount of retained earnings as of December 31, 2014.

a.

Expert Solution
Check Mark

Explanation of Solution

Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:

Assets = Liabilities + Stockholders’ equity 

Retained earnings:

Retained earnings are the portion of earnings kept by the business for the purpose of reinvestments, payment of debts, or for future growth.

The amount of retained earnings is calculated as follows:

Assets=Liabilities+Stockholders’ Equity
Cash=Note Payable+Common Stock+Retained Earnings
$156,000=$85,600+$52,400+$18,000 (1)

Table (1)

Working note 1:

Calculate the value of retained earnings:

Retainedearnings=[Assets (cash)Liabilities(Notepayable)Commonstock]=$156,000$85,600$52,400=$18,000

b.

To determine

Create an accounting equation by recording the beginning account balance under appropriate elements.

b.

Expert Solution
Check Mark

Explanation of Solution

Accounting equation:

Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:

Assets = Liabilities + Stockholders’ equity 

Create an accounting equation by recording the beginning account balance under appropriate elements:

Company P
Effect of 2014 Transactions on the Accounting Equation
EventAssets=Liabilities+Stockholders’ Equity
Cash=Notes Payable+Common Stock+Retained Earnings
Beginning Balances$156,000=$85,600+$52,400+$18,000

Table (2)

c.

To determine

Recording the revenue, expense, and dividend events under the appropriate elements of the accounting equation created in the part b.

c.

Expert Solution
Check Mark

Explanation of Solution

Accounting equation:

Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:

Assets = Liabilities + Stockholders’ equity 

Accounting equation is created and the beginning account balances of each account, revenue, expense, and dividend events are recorded in the following manner:

Company P
Effect of 2014 Transactions on the Accounting Equation
EventAssets=Liabilities+Stockholders’ Equity
Cash=Notes Payable+Common Stock+Retained Earnings
Beginning Balances$156,000=$85,600+$52,400+$18,000
1. Earned Revenue$36,000=NA+NA+$36,000
2. Paid expenses($20,000)=NA+NA+($20,000)
3. Paid dividend($3,000)=NA+NA+($3,000)
Ending Balance$169,000=$85,600+$52,400+$31,000

Table (2)

d.

To determine

 Prove the equality of the accounting equation as of December 31, 2015.

d.

Expert Solution
Check Mark

Explanation of Solution

Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners.

Assets = Liabilities + Stockholders’ equity 

Prove the equality of the accounting equation:

Cash ($)=Note Payable ($)+Common Stock ($)+Retained earnings ($)
169,00085,60052,40031,000

Table (4)

Conclusion

Therefore, the equality of the accounting equation is proved.

e.

To determine

Identify the beginning and ending balances in the cash and common stock accounts and explain the reason for the beginning and ending balances of cash account being different while the beginning and ending balances of common stock being same.

e.

Expert Solution
Check Mark

Explanation of Solution

Cash: Cash represents the cash reserves available with the company at a point of time.

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend

The reason for the beginning and ending balances of cash account being different and the beginning and ending balances of common stock being same is explained as follows:

The cash account had the beginning and the ending balance of $156,000 and $169,000 respectively. The common stock account had beginning balance of $52,400 and this was not changed during the period. The accounting events of Company P during the 2015 affected only the cash account and did not affect the common stock account.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 1 Solutions

Survey Of Accounting

Ch. 1 - Prob. 11QCh. 1 - 12. Distinguish between elements of financial...Ch. 1 - Prob. 13QCh. 1 - 14. To whom do the assets of a business belong?Ch. 1 - 15. Describe the differences between creditors and...Ch. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - Prob. 18QCh. 1 - 19. What does a double-entry bookkeeping system...Ch. 1 - 22. How does acquiring capital from owners affect...Ch. 1 - Prob. 21QCh. 1 - Prob. 22QCh. 1 - 25. What are the three primary sources of assets?Ch. 1 - 26. What is the source of retained earnings?Ch. 1 - 27. How does distributing assets (paying...Ch. 1 - 28. What are the similarities and differences...Ch. 1 - Prob. 27QCh. 1 - 30. Which of the general-purpose financial...Ch. 1 - 31. What causes a net loss?Ch. 1 - 35. What three categories of cash receipts and...Ch. 1 - Prob. 31QCh. 1 - 37. Discuss the term articulation as it relates to...Ch. 1 - 38. How do temporary accounts differ from...Ch. 1 - Prob. 34QCh. 1 - 41. Identify the three types of accounting...Ch. 1 - Prob. 36QCh. 1 - Prob. 37QCh. 1 - Prob. 1ECh. 1 - Prob. 2ECh. 1 - Prob. 3ECh. 1 - Prob. 4ECh. 1 - Prob. 5ECh. 1 - Prob. 6ECh. 1 - Prob. 7ECh. 1 - Prob. 8ECh. 1 - Prob. 9ECh. 1 - Prob. 10ECh. 1 - Prob. 11ECh. 1 - Prob. 12ECh. 1 - Prob. 13ECh. 1 - Prob. 14ECh. 1 - Prob. 15ECh. 1 - Prob. 16ECh. 1 - Prob. 17ECh. 1 - Prob. 18ECh. 1 - Prob. 19ECh. 1 - Prob. 20ECh. 1 - Prob. 21ECh. 1 - Prob. 22ECh. 1 - Prob. 23ECh. 1 - Prob. 24ECh. 1 - Prob. 25ECh. 1 - Types of transactions and the horizontal...Ch. 1 - Prob. 27ECh. 1 - Prob. 28PCh. 1 - Prob. 29PCh. 1 - Prob. 30PCh. 1 - Prob. 31PCh. 1 - Prob. 32PCh. 1 - Prob. 33PCh. 1 - Prob. 34PCh. 1 - Prob. 1ATCCh. 1 - ATC 1-5 Writing Assignment Elements of financial...
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
The KEY to Understanding Financial Statements; Author: Accounting Stuff;https://www.youtube.com/watch?v=_F6a0ddbjtI;License: Standard Youtube License