Thursday 6 March 2014

accounting equation

Lang Enterprises was started when it acquired $4000 cash from creditors and $6000 from owners. The company immediately purchased land that cost $9000.

Required
a. Record the events under an accounting equation.
b. After all events have been recorded. Lang's obligations to creditors represent what percent of total assets?
c. After all events have been recorded. Lang's stockholder's equity represents what percent of total assets?
d. Assume the debt is due. Given that Lang has $6000 in stockholders' equity; can the company repay the creditors at this point? Why or why not? 

Respond to the following:

Why is the knowledge of accounting concepts and terminology useful to anyone in a business activity?
Is there a difference between bookkeeping and accounting? Discuss.
Accounting reports past performance. How can this be useful when planning future operations?

Ex 1-9A Missing Information and Recording Events

As of December 31, 2013, Post Company had total cash of $156,000, notes payable of $85,600, and a common stock of $52,400. During 2014, post earned $36,000 of cash revenue, paid $20,000 for cash expenses, and paid a $3000 cash dividend to the stockholders.

a. Determine the amount of retained earnings as of December 31,2013.
b. Create an accounting equation and record the beginning account balances under the appropriate elements.
c. Record the revenue, expense, and dividend events under the appropriate elements of the accounting equation created equation created in Requirement b.
d. Prove the equality of the accounting equation as December 31, 2014.
e. Identify the beginning and ending balance in the Cash and Common Stock accounts. Explain why the beginning and ending balances in the Cash Account are different, but the beginning and ending balance in the Common Stock account remains the same.

Ex 1-12A Accounts titles and the accounting equation

The following account titles were drawn from the general ledger of Gutter Control, Incorporated (GCI): Cash, Notes Payable, Land, Accounts Payable, Office Furniture, Salaries Expenses, Common Stock, Service Revenue, Interest Expense, Utilities Payable, Utilities Expense, Trucks, Supplies, Operating Expense, Rent Revenue, Dividends, Computers, Building, Supplies Expense, Gasoline Expense, Retained Earnings, Dividends.

Required
a. Create an accounting equation using the elements assets, liabilities, and stockholders' equity. List each account title under the elements of the accounting equation to which it belongs.
b. Will all business have the same number of accounts? Explain your answer.

Ex 1-11A Effect of transactions on general ledger accounts

at the beginning of 2013, Foster Corp's accounting records had following general ledger accounts and balances.

Foster Corp. completed the following transactions during 2013:

1. Purchased land for $20,000 cash.
2. Acquired $10,000 cash from the issue of common stock.
3. Received $90,000 cash for providing services to customers.
4. Paid cash operating expense of $65,000.
5. Borrowed $20,000 cash from bank.
6. Paid a $5000 cash dividend to the stockholders.
7. Determined that the market value of the land purchased in event 1 is $30000.

Required
a. Record the transactions in the appropriate general ledger accounts. Record the amounts of revenue, expense and dividends in the Retained Earnings column. Provide the appropriate titles for these accounts in the last column of the table.
b. As of December 31,2013, determine the total amount of assets, liabilities, and stockholders’ equity and present this information in the form of an accounting equation.
c. What is the amount of total assets, liabilities, and stockholders' equity as of January 1, 2014?
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