Longhorn corporation provides low cost food delivery

1. Select the financial statement that matches with the description (Related transactions)

Related transactions

Financial Statements

a.

Change in owners’ claims to resources

b.

Profitability of the company

c.

Change in cash as a result of operating, investing, and financing activities

d.

Resources equal creditors’ and owners’ claims to those resources

2. At the beginning of the year (January 1), Buffalo Drilling has $11,000 of common stock outstanding and retained earnings of $8,200. During the year, Buffalo reports net income of $8,500 and pays dividends of $3,200. In addition, Buffalo issues additional common stock for $8,000.

Required:

Prepare the statement of stockholders' equity at the end of the year (December 31).

BUFFALO DRILLING

Statement of Stockholders’ Equity

Common Stock

Retained Earnings

Total Stockholders’ Equity

Beginning balance

Ending balance

3. Wolfpack Construction has the following account balances at the end of the year.

Accounts

Balances

Equipment

$

26,000

Accounts payable

3,000

Salaries expense

33,000

Common stock

11,000

Land

18,000

Notes payable

20,000

Service revenue

39,000

Cash

6,000

Retained earnings

?

Required:

Use only the appropriate accounts to prepare a balance sheet.

WOLFPACK CONSTRUCTION

Balance Sheet

Assets

Liabilities

Total liabilities

0

Stockholders’ Equity

Total stockholders’ equity

0

Total assets

$0

Total liabilities and stockholders’ equity

$0

4. Longhorn Corporation provides low-cost food delivery services to senior citizens. At the end of the year, the company reports the following amounts:

Cash

$

1,200

Service revenue

$

67,700

Equipment

29,000

Cost of goods sold (food expense)

53,400

Accounts payable

4,400

Buildings

40,000

Delivery expense

2,600

Supplies

3,400

Salaries expense

5,500

Salaries payable

800

In addition, the company had common stock of $40,000 at the beginning of the year and issued an additional $4,000 during the year. The company also had retained earnings of $18,200 at the beginning of the year.

Show your work

1. Prepare the income statement for Longhorn Corporation.

LONGHORN CORPORATION

Income Statement

Expenses:

Total expenses

0

2. Prepare the statement of stockholders’ equity for Longhorn Corporation.

LONGHORN CORPORATION

Statement of Stockholders’ Equity

Common Stock

Retained Earnings

Total Stockholders’ Equity

Beginning balance

Ending balance

5. Below are incomplete financial statements for Bulldog, Inc. Required:

Calculate the missing amounts.

BULLDOG, INC.

Income Statement

Revenues

$39,000

Expenses:

Salaries

Advertising

6,000

Utilities

4,000

Net income

BULLDOG, INC.

Statement of Stockholders' Equity

Common Stock

Retained Earnings

Total Stockholders' Equity

Beginning balance

$10,000

$7,000

$17,000

Issuances

1,100

1,100

Add: Net income

Less: Dividends

(3,000)

(3,000)

Ending balance

$11,100

$10,000

$21,100

BULLDOG, INC.

Balance Sheet

Assets

Liabilities

Cash

$4,000

Accounts payable

Write in here

Accounts receivable

3,000

Stockholders' Equity

Supplies

9,000

Common stock

Write in here

Equipment

10,000

Retained earnings

Write in here

Total assets

$26,000

Total liabilities and stockholders' equity

Write answer in here

6. Cornhusker Company provides the following information at the end of 2018.

Cash remaining

$

4,800

Rent expense for the year

7,000

Land that has been purchased

21,000

Retained earnings

12,400

Utility expense for the year

4,900

Accounts receivable from customers

7,200

Service revenue earned during the year

37,000

Salary expense for the year

13,300

Accounts payable to suppliers

2,200

Dividends paid to shareholders during the year

3,200

Common stock that has been issued prior to 2018

16,000

Salaries owed at the end of the year

2,400

Insurance expense for the year

3,500

No common stock is issued during 2018, and the balance of retained earnings at the beginning of 2018 equals $7,300.

Required:

1. Prepare the income statement for Cornhusker Company on December 31, 2018.

CORNHUSKER COMPANY

Income Statement

For the year ended December 31, 2018

Expenses:

Total expenses

2. Prepare the statement of stockholders’ equity for Cornhusker Company on December 31, 2018.

CORNHUSKER COMPANY

Statement of Stockholders’ Equity

For the year ended December 31, 2018

Common Stock

Retained Earnings

Total Stockholders’ Equity

Beginning balance

Ending balance

3. Prepare the balance sheet for Cornhusker Company on December 31, 2018.

CORNHUSKER COMPANY

Balance Sheet

December 31, 2018

Assets

Liabilities

Total liabilities

Stockholders’ Equity

Total stockholders’ equity

Total assets

Total liabilities and stockholders’ equity

7. The four underlying assumptions of generally accepted accounting principles are economic entity, monetary unit, periodicity, and going concern. Consider the four independent situations below.

1. Jumbo's is a local restaurant. Due to a bad shipment of potatoes, several of the company's customers become ill, and the company receives considerable bad publicity. Revenues are way down, several of its bills are past due, and the company is making plans to close the restaurant at the end of the month. The company continues to report its assets in the balance sheet at historical (original) cost.

2. Gorloks Tax Services is owned and operated by Sam Martin. The company has the usual business assets: land, building, cash, equipment, and supplies. In addition, Sam decides to buy a boat for him and his family to enjoy on the weekends. Sam includes the boat as an asset on the balance sheet of Gorloks Tax Services.

3. Claim Jumpers International, a U.S.-based company, has operations in the United States and in Europe. For the current year, the company purchased two trucks in the United States for $10,000 and three trucks in Europe for €20,000 (euros). Because of the differences in currencies, the company reported "Five Trucks" with no corresponding amount in the balance sheet.

4. Cobbers Etc. sells specialty music equipment ranging from African bongo drums to grand pianos. Because of the fluctuating nature of the business, management decides to publish financial statements only when a substantial amount of activity has taken place. Its last set of financial statements covered a period of 14 months, and the set of financial statements before that covered a period of 18 months.

Required:

For each situation, select which of the underlying assumptions of GAAP is violated.

Situation

Assumption Violated

1.

2.

3.

4.

Chap 2.

1. Suppose a local company has the following balance sheet accounts. Calculate the missing amounts assuming the business has total assets of $37,500.

Accounts

Balances

Land

$9,000

Equipment

Salaries Payable

4,300

Notes Payable

Supplies

2,100

Cash

7,200

Stockholders’ Equity

13,500

Accounts Payable

1,700

Prepaid Rent

3,200

2. Boilermaker House Painting Company incurs the following transactions for September.

Required:

For each transaction, describe the dual effect on the accounting equation. For example, for the first transaction, (1) assets increase and (2) stockholders' equity increases.

Transactions

Dual Effect

1.

Paint houses in the current month for $15,000 on account.

Assets increase and stockholders' equity increases.

2.

Purchase painting equipment for $16,000 cash.

3.

Purchase office supplies on account for $2,500.

4.

Pay employee salaries of $3,200 for the current month.

5.

Purchase advertising to appear in the current month, $1,200.

6.

Pay office rent of $4,400 for the current month.

7.

Receive $10,000 from customers in (1) above.

8.

Receive cash of $5,000 in advance from a customer who plans to have his house painted in the following month.