1.
Assets = Liabilities + Shareholders Equity
Business transaction: Business transaction is a record of any economic activity, resulting in the change in the value of the assets, the liabilities, and the Shareholder’s equities, of a business. Business transaction is also referred to as financial transaction.
To Indicate: The effect of each given transaction of Company PSM on the accounting equation.
2.
To Prepare: The financial statements for Company PSM for the month ended June 30, 20Y5.
3.
To Prepare: The statement of
4.
To Prepare: Prepare the balance sheet of Company PSM at June 30, 20Y5.
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Chapter 1 Solutions
Corporate Financial Accounting
- Throughout this book, we will present a continuing narrative about Harry and Belinda Johnson. Following is a brief description of the lives of this couple.Harry is 28 years old and graduated five years ago with a bachelor's degree in interior design from a large Midwestern university near his hometown in Indiana. Since graduation Harry has been working in small interior design firm in Kansas City earning a salary of about $45,000.Belinda is 27, has a degree in business administration from a university on the West Coast, and has been employed in a medium-size manufacturing firm in California for about five years. Harry and Belinda both worked on their schools' student newspapers and met at a conference during their junior year in college.After all these years they met again socially in January in Kansas City, Missouri where Belinda was visiting relatives and by chance she and Harry were at the same museum. After getting reacquainted they started dating and in only a matter of months…arrow_forwardRay of Light (ROL) is a not-for-profit organization formed 7 years ago by Ella, a retired professional singer. The choir won several major singing competitions across North America and is in the process of producing their own music available on itunes and on CD available next month. The choir intends to record an annual CD of its Christmas concert music, which will also be available by download on itunes. Ella is in charge of ROL's daily operations. All major financial and operating decisions are approved by the Board of Directors. Initial financing for ROL came from private donations. This year a fundraising committee was formed to raise funds for special projects. Your CPA firm has a policy of supporting its staff in volunteering their time to not-for-profit activities. You recently joined ROL's board of directors and volunteered to assist with all accounting issues. Details on ROL's accounting policies and other related information are provided below in Exhibit A. Required: Use…arrow_forwardRequired Information While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat (GTE), specializes in custom-sculpted cakes for weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of 2023, and each contributed $140,000 in exchange for a 50 percent ownership Interest. GTE also borrowed $560,000 from a local bank. Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GTE's 2023 activities: • GTE uses the cash method of accounting (for both book and tax purposes) and reports Income on a calendar-year basis. • GTE received $900,000 of sales revenue and reported $420,000 of cost of goods sold (it did not have any ending Inventory). • GTE paid $75,000 compensation to James, $75,000 compensation to Paul, and $85,000 of…arrow_forward
- Required information While James Craig and his former classmate Paul Dolittle both studied accounting at school, they ended up pursuing careers in professional cake decorating. Their company, Good to Eat (GTE), specializes in custom-sculpted cakes for weddings, birthdays, and other celebrations. James and Paul formed the business at the beginning of 2023, and each contributed $80,000 in exchange for a 50 percent ownership interest. GTE also borrowed $320,000 from a local bank. Both James and Paul had to personally guarantee the loan. Both owners provide significant services for the business. The following information pertains to GTE's 2023 activities: • GTE uses the cash method of accounting (for both book and tax purposes) and reports income on a calendar-year basis. • GTE received $600,000 of sales revenue and reported $280,000 of cost of goods sold (it did not have any ending inventory). • GTE paid $45,000 compensation to James, $45,000 compensation to Paul, and $55,000 of…arrow_forwardMulroy Inc. is a privately held corporation that owns 5 car dealerships. On February 2, 2022 the owner, Jack Mulroy pledged for the company to contribute a new Ford Explorer to the Heart of Mercy charity raffle for their annual fundraiser. The fundraiser was held on March 17, 2022 and the winning raffle ticket was selected. The car was delivered to the winner on April 4, 2022 The accountant for Mulroy Inc. is unsure of when the contribution should be recognized as an expense. Mulroy Inc. should recognize the contribution in a) February 2022b) March 2022c) April 2022arrow_forwardRequired information [The following information applies to the questions displayed below.] Sandy and John Ferguson got married eight years ago and have a seven-year-old daughter, Samantha. In 2023, Sandy worked as a computer technician at a local university earning a salary of $153,300, and John worked part time as a receptionist for a law firm, earning a salary of $30,300. Sandy also does some Web design work on the side and reported revenues of $5,300 and associated expenses of $1,400. The Fergusons received $1,060 in qualified dividends and a $265 refund of their state income taxes. The Fergusons always itemize their deductions, get the full benefit of deducting the entire amount of state income taxes paid, and their itemized deductions were well over the standard deduction amount last year. Use Exhibit 8-10, Tax Rate Schedule, Dividends and Capital Gains Tax Rates, 2023 AMT exemption for reference. The Fergusons reported making the following payments during the year: State income…arrow_forward
- Upon graduation from high school, John Abel immediately accepted a job as an electrician’s assistant for a large local electrical repair company. After three years of hard work, John received an electrician’s license and decided to start his own business. He had saved $12,000, which he invested in the business. First, he transferred this amount from his savings account to a business bank account for Abel Electric Repair Company, Incorporated. His lawyer had advised him to start as a corporation. He then purchased a used panel truck for $9,000 cash and secondhand tools for $1,500; rented space in small building; inserted an ad in the local paper; and opened the doors on October 1, 2019. Immediately, John was very busy; after one month, he employed an assistant. Although John knew practically nothing about the financial side of the business, he realized that a number of reports were required and that costs and collections had to be controlled carefully. At the end of the year, prompted…arrow_forwardWilliam Murray achieved one of his life-long dreams by opening his own business. The Coronado Driving Range, on May 1, 2025. He invested $24,100 of his own savings in the business. He paid $6,850 cash to have a small building constructed to house the operations and spent $860 on golf clubs, golf balls, and yardage signs. Murray leased 4 acres of land at a cost of $1,320 per month. (He paid the first month's rent in cash.) During the first month, advertising costs totaled $760, of which $200 was unpaid at the end of the month. Murray paid his three nephews $400 for retrieving golf balls. He deposited in the company's bank account all revenues from customers ($5,260). On May 15, Murray withdrew $810 in cash for personal use. On May 31, the company received a utility bill for $190 but did not immediately pay it. On May 31, the balance in the company bank account was $18.560. Murray is feeling pretty good about results for the first month, but his estimate of profitability ranges from a…arrow_forwardMulroy Inc. is a company that owns 5 car dealerships. On October 25, 2021 the owner, Jack Mulroy pledged to contribute a new Ford Explorer to a local charity’s raffle for their annual fundraiser. The fundraiser will be held on November 30, 2021 at which time the car will be delivered to the winner of the raffle. Mulroy, Inc. delivered the Ford Explorer as pledged to the winner on November 30, 2021. The accountant for Mulroy is unsure if the Contribution should be recognized as an expense in October when the pledge was made or in November when the car was delivered. Accounting Issue: When should Mulroy recognize the contribution? Your Interpretation of the Guidance: Mulroy Inc. should recognize the contribution in October 2021 November 2021arrow_forward
- Required Information [The following information applies to the questions displayed below.] Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm, while Jessie runs a craft business from their home. Jessie's craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie's college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married joint. Assume that the employer portion of the self-employment tax on Jessie's income is $831. Joe and Jessie have summarized the income and expenses they expect to report this year as…arrow_forwardUpon graduation from high school, William Nitter accepted a job as a plumber's assistant for a large local plumbing company. After three years of hard work, William received a plumbing licence and decided to start his own business. He had saved $31,000, which he invested in the business. His lawyer had advised him to start as a corporation. First, he transferred the $31.000 from his savings account to a business bank account for Willam's Plumbing Services Inc. and was issued shares. He then purchased a used panel truck for $21,500 cash and second-hand tools for $3,700, rented space in a small building, inserted an advertisement in the local paper, and opened his business on July 1 of the current year. Immediately. William was very busy, after one month, he employed an assistant D Although William knew practically nothing about the financial side of the business, he realized that a number of reports were required and that expenses and collections from clients had to be controlled…arrow_forward[The following information applies to the questions displayed below.] Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm, while Jessie runs a craft business from their home. Jessie's craft business consists of making craft items for sale at craft shows that are held periodically at various locations. Jessie spends considerable time and effort on her craft business, and it has been consistently profitable over the years. Joe and Jessie own a home and pay interest on their home loan (balance of $220,000) and a personal loan to pay for Lizzie's college expenses (balance of $35,000). Neither Joe nor Jessie is blind or over age 65, and they plan to file as married joint. Assume that the employer portion of the self-employment tax on Jessie's income is $831. Joe and Jessie have summarized the income and expenses they expect to report this year as follows: Note:- Do not…arrow_forward
- Corporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning