## Sunday, 20 May 2012

### Problem 1-2A Computing missing information using accounting knowledge L.O. A1, P1 [The following information applies to the questions displayed below.] The following table contains financial information from 5 different companies:

Problem 1-2A Computing missing information using accounting knowledge L.O. A1, P1
[The following information applies to the questions displayed below.]
 The following table contains financial information from 5 different companies:

 Company A Company B Company C Company D Company E December 31, 2010 Assets \$ 44,000 \$ 34,320 \$ 28,160 \$ 78,320 \$ 120,120 Liabilities 36,080 24,024 15,206 54,040 ? December 31, 2011 Assets 47,000 33,840 ? 85,540 129,720 Liabilities ? 23,011 15,430 41,059 102,478 During year 2011 Stock issuances 6,000 1,400 9,750 ? 6,500 Net income (loss) 10,730 ? (769) 13,201 7,718 Cash dividends 3,500 2,000 5,875 0 11,000
Problem 1-2A Part 1

 1a. What is the amount of equity on December 31, 2010?

 Amount of equity \$ 7,920

 1b. What is the amount of equity on December 31, 2011?

 Amount of equity \$ 21,150

 1c. What is the amount of liabilities on December 31, 2011?

 Amount of liabilities \$ 25,850
Explanation:
Company A:
 a. Equity on December 31, 2010: Assets \$ 44,000 Liabilities (36,080 ) Equity \$ 7,920 b. Equity on December 31, 2011: Equity, December 31, 2010 \$ 7,920 Plus stock issuances 6,000 Plus net income 10,730 Less cash dividends (3,500 ) Equity, December 31, 2011 \$ 21,150 c. Amount of liabilities on December 31, 2011: Assets \$ 47,000 Equity (21,150 ) Liabilities \$ 25,850
Problem 1-2A Part 2

 2a. What is the amount of equity on December 31, 2010?

 Amount of equity \$ 10,296

 2b. What is the amount of equity on December 31, 2011?

 Amount of equity \$ 10,829

 2c. What is net income for year 2011?

 Net income \$ 1,133

Explanation:
Company B:

a. and b.
 12/31/2010 12/31/2011 Equity: Assets \$ 34,320 \$ 33,840 Liabilities (24,024 ) (23,011 ) Equity \$ 10,296 10,829

c.
 Net income for 2011: Equity, December 31, 2010 \$ 10,296 Plus stock issuances 1,400 Plus net income ? Less cash dividends (2,000 ) Equity, December 31, 2011 \$ 10,829

 Therefore, net income must have been   \$ 1,133.
Problem 1-2A Part 3
 3 Calculate the amount of assets for Company C on December 31, 2011. (Omit the "\$" sign in your response)

 Amount of Assets \$ 33,028
Explanation:
Company C:
 First, calculate the beginning balance of equity:

 Dec. 31, 2010 Assets \$ 28,160 Liabilities (15,206 ) Equity \$ 12,954

 Next, find the ending balance of equity as follows:

 Equity, December 31, 2010 \$ 12,954 Plus stock issuances 9,750 Plus net income 769 Less cash dividends (5,875 ) Equity, December 31, 2011 \$ 17,598

 Finally, find the ending amount of assets by adding the ending balance of equity to the ending balance of liabilities:

 Dec. 31, 2011 Liabilities \$ 15,430 Equity (17,598 ) Assets \$ 33,028
Problem 1-2A Part 4
 4 Calculate the amount of stock issuances for Company D during year 2011. (Omit the "\$" sign in your response):

 Amount of stock issuances \$ 7,000
Explanation:
 Company D: First, calculate the beginning and ending owner’s equity balances:

 12/31/2010 12/31/2011 Assets \$ 78,320 \$ 85,540 Liabilities (54,040 ) (41,059 ) Equity \$ 24,280 44,481

 Then, find the amount of stock issuances during 2011:

 Equity, December 31, 2010 \$ 24,280 Plus stock issuances ? Plus net income 13,201 Less cash dividends 0 Equity, December 31, 2011 \$ 44,481

 Thus, stock issuances must have been: \$ 7,000
Problem 1-2A Part 5
 5 Calculate the amount of liabilities for Company E on December 31, 2010. (Omit the "\$" sign in your response):

 Amount of Liabilities \$ 96,096
Explanation:
 Company E: First, compute the balance of equity as of December 31, 2011:

 Assets \$ 129,720 Liabilities (102,478 ) Equity \$ 27,242

 Next, find the beginning balance of equity as follows:

 Equity, December 31, 2010 \$ ? Plus stock issuances 6,500 Plus net income 7,718 Less cash dividends (11,000 ) Equity, December 31, 2011 \$ 27,242

 Thus, the beginning balance of equity was \$24,024.

 Finally, find the beginning amount of liabilities by subtracting the beginning balance of equity from the beginning balance of assets:

 Dec. 31, 2010 Assets \$ 120,120 Equity (24,024 ) Liabilities \$ 96,096