Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN: 9780357033609
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 2, Problem 2FPE
Preparing financial statements. Hugo Garcia is preparing his
- a. Hugo rents a house for $1,350 a month.
- b. On June 21, 2020 Hugo bought diamond earrings for his wife and charged them using his Visa card. The earrings cost $900, but he hasn’t yet received the bill.
- c. Hugo borrowed $3,500 from his parents last fall, but so far, he has made no payments to them.
- d. Hugo makes monthly payments of $225 on an installment loan; about half of it is interest, and the balance is repayment of principal. He has 20 payments left, totaling $4,500.
- e. Hugo paid $3,800 in taxes during the year and is due a tax refund of $650, which he hasn’t yet received.
- f. Hugo invested $2,300 in a mutual fund.
- g. Hugo’s Aunt Lydia gave him a birthday gift of $300.
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Hugo Garcia is preparing his balance sheet and income and expense statementfor the year ending December 31, 2020. He is having difficulty classifying six items and sks for your help. Which,if any, of the following transactions are assets, liabilities, income, or expense items?a. Hugo rents a house for $1,350 a month.b. On June 21, 2020 Hugo bought diamond earrings for his wife and charged them using his Visa card. The earringscost $900, but he hasn’t yet received the bill.c. Hugo borrowed $3,500 from his parents last fall, but so far, he has made no payments to them.d. Hugo makes monthly payments of $225 on an installment loan; about half of it is interest, and the balance isrepayment of principal. He has 20 payments left, totaling $4,500.e. Hugo paid $3,800 in taxes during the year and is due a tax refund of $650, which he hasn’t yet received.f. Hugo invested $2,300 in a mutual fund.g. Hugo’s Aunt Lydia gave him a birthday gift of $300.
Hugo Garcia is preparing his balance sheet and income and expense statement for the year ending December 31, 2020. He is having difficulty classifying a few items and asks for your help.
Which of the transactions are assets, liabilities, income, or expense items?
a. Hugo rents a house for $1,350 a month.
b. Hugo bought diamond earrings for his wife and charged them using his Visa card. The earrings cost $900, but he hasn’t yet received the bill.
c. Hugo borrowed $3,500 from his parents last fall, but so far, he has made no payments to them.
d. Hugo makes monthly payments of $225 on an installment loan; about half of it is interest, and the balance is repayment of principal. He has 20 payments left, totaling $4,500.
e. Hugo paid $3,800 in taxes during the year and is due a tax refund of $650, which he hasn’t yet received.
f. Hugo invested $2,300 in a mutual fund.
g. Hugo’s Aunt Lydia gave him a birthday gift of $300.
S. Waweru starts business on 1st July 2020, when he deposits Shs. 18,000 into his business bank account and Shs. 2,500 in his cash account. During the month of July, he undertakes the following transactions:-
2020
July 3 He purchases shop fittings for sh. 2,500 and pays by cheque.
July 4 He buys a motor vehicle from AB & Co. on credit Sh. 3,000.
July 6 He buys stock for Sh. 1,500 and pays through bank.
July 8 He sells goods for cash Sh.1,000.
July 10 Buys goods on credit from XY & Co. for Sh. 1,200
July 12 Sells goods to A. Smith for Sh. 900 on credit
July 13 Pays wages Sh. 120 by cash
July 14 A. Smith returns goods worth Sh. 200
July 15 Pays to AB & Co. Sh. 3,000 by cheque
July 17 Goods returned to XY & Co. amounting to Sh. 350
July 21 Receives from A. Smith a cheque for Sh. 700
July 25 Sells goods for cash Sh. 300.
July 30…
Chapter 2 Solutions
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
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- You are the accountant for Speedy Company and are preparing the financial statements for 2019. Near the end of 2019, Speedy loaned its president 100,000 (a material amount) because she was having financial difficulties. The note was properly recorded as a note receivable by Speedy. You are unsure of how to classify this note on the 2019 ending balance sheet and ask the president when the note is due. She replies, We never really set a due date; I might repay it in 2020 or maybe in a couple of years when I get more financially secure. It would be best to classify this note as a current asset in the usual manner because that will increase our working capital and current ratio, which will make our creditors and shareholders happy. Required: From financial reporting and ethical perspectives, what do you think of the presidents suggestion?arrow_forwardBlue Company, an architectural firm, has a bookkeeper who maintains a cash receipts and disbursements journal. At the end of the year (2019), the company hires you to convert the cash receipts and disbursements into accrual basis revenues and expenses. The total cash receipts are summarized as follows. The accounts receivable from customers at the end of the year are 120,000. You note that the accounts receivable at the beginning of the year were 190,000. The cash sales included 30,000 of prepayments for services to be provided over the period January 1, 2019, through December 31, 2021. a. Compute the companys accrual basis gross income for 2019. b. Would you recommend that Blue use the cash method or the accrual method? Why? c. The company does not maintain an allowance for uncollectible accounts. Would you recommend that such an allowance be established for tax purposes? Explain.arrow_forwardChulu own a retail shop. The following information is available from the few records kept for the beginning and end of 2020. 1 January 31 December K K Cash in shop till 350 250 Bank overdraft 800 300 Inventory 2,600 3,300 Owed by customers 4,500…arrow_forward
- On June 7, 2022 your mother visits Jewel to purchase purchase shampoo, paper towels, toothpaste, and laundry detergent. She finds all of the items on her list and pays the cashier $40 in cash (including taxes) for her purchases. Your mother returns home to find you studying for Acc. 350 and you comment that she had a contract with Jewel. She states that she paid in cash ... no legal document was signed. Eplain why a contract existed between your mother and Jewel on June 7, 2022?arrow_forwardPrepare journal entries for the following transactions. Make sure to observe the proper format of journal entries. Use EXCEL in presenting your answers. Mr. Panatag opened the Panatag Security Services. The following financial transactions and other arrangements took place from July 01 to August, 2019: July 01 Mr. Panatag invested his savings in the business amounting to P895,000, and his old car with market value of P545,000. July 02 Mr. Panatag signed a lease contract to be used as the office of his business. In accordance with the lease contract, Mr. Panatag paid the advance rental for three months amounting to P60,000. July 03 The owner purchased furniture amounting to P50,00. Paid 70% cash and the balance will be paid after 30 days. July 04 Mr. Panatag conducted interviews of security guards, and hired 10 security guards with a monthly salary of P13,000 per month. July 05 The owner secured a loan from the bank amounting to P250,000 payable over the…arrow_forwardAccounting On 1 April 2021, Michael commenced business as a plumber. His business is not registered for GST. He put into a business bank account his savings of $50,000. He also owns a van worth $11,000 which he uses solely for business purposes. Michael provided you with the following information. • Debtors (Accounts Receivable) at 31 March 2022 were $21,000 and materials on hand cost $2,000. • During the year Michael had withdrawn $1,000 per month for housekeeping and had transferred $24,000 from the business bank account to deposit for ownership of an apartment he intends to live in. • New plant and machinery had a book value of $7,500 and there was a new delivery van at $20,000 which had been purchased on 1 March 2022. When Michael bought the new delivery van, he traded in his old van for $7,000; paid $11,000 cash and got a finance company loan for the balance. • Michael owed creditors $4,000 and had an overdraft at the bank of $5,200. Required: Prepare a BALANCE SHEET as at 31…arrow_forward
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