Chapter 1; Assignments 2:

EXERCISE 1-7
1. (c)
2. (d)
3. (a)
4. (b)
5. (d)
6. (b)
7. (e)
8. (f)

EXERCISE 1-8
(a)
1. Shareholders invested £15,000 cash in the business.
2. Purchased equipment for £5,000, paying £2,000 in cash and the
balance of £3,000 on account.
3. Paid £750 cash for supplies.
4. Earned £9,100 in revenue, receiving £4,600 cash and £4,500 on
account.
5. Paid £1,500 cash on accounts payable.
6. Paid £2,000 cash dividends to shareholders.
7. Paid £650 cash for rent.
8. Collected £450 cash from clients on account.
9. Paid salaries and wages of £3,900.
10. Incurred £500 of utilities expense on account.

(b)
Investment............................................................................... £15,000
Service revenue ...................................................................... 9,100
Dividends ................................................................................ (2,000)
Rent expense .......................................................................... (650)
Salaries and wages expense ................................................. (3,900)
Utilities expense ..................................................................... (500)
Increase in equity ................................................................... £17,050
(c)

Service revenue .................................................................... £9,100

Rent expense .......................................................................... (650)
Salaries and wages expense ................................................. (3,900)
Utilities expense ..................................................................... (500)
Net income .............................................................................. £4,050

EXERCISE 1-9

J. L. KANG & CO. Ltd.

Income Statement
For the Month Ended August 31, 2017

Revenues
Service revenue ......................................................... £9,100
Expenses
Salaries and wages expense .................................... £3,900
Rent expense ............................................................. 650
Utilities expense ........................................................ 500
Total expenses ................................................... 5,050
Net income......................................................................... £4,050

J. L. KANG & CO. Ltd.

Retained Earnings Statement
For the Month Ended August 31, 2017

Retained earnings, August 1 .......................................... £ 0

Add: Net income ........................................................... 4,050
4,050
Less: Dividends.............................................................. 2,000
Retained earnings, August 31............................. £ 2,050
 J.L. KANG & CO. Ltd.
Statement of Financial Position
August 31, 2017

Assets
Equipment........................................................................ £ 5,000
Supplies ........................................................................... 750
Accounts receivable ....................................................... 4,050
Cash ................................................................................. 9,250
Total assets.............................................................. £19,050

Equity and Liabilities

Equity
Share capital—ordinary........................................... £15,000
Retained earnings.................................................... 2,050 £17,050
Liabilities
Accounts payable .................................................... 2,000
Total equity and liabilities ................................. £19,050

..................... 40,000
Add: Dividends..................................................................... 15,000
Net income for 2016............................................................... 55,000
(b)
Equity—12/31/17 ( 480,000 – 300,000) ............................. 180,000
Equity—1/1/17—see (a) ....................................................... 140,000
Increase in equity................................................................. 40,000
Less: Additional investment .............................................. 50,000
Net loss for 2017 .................................................................. (10,000)

(c)
Equity—12/31/18 ( 590,000 – 400,000) ............................. 190,000
Equity—1/1/18—see (b) ....................................................... 180,000
Increase in equity ................................................................ 10,000
Less: Additional investment .............................................. 15,000
(5,000)
Add: Error! Reference source not found.Dividends ............ 30,000
Net income for 2018............................................................. 25,000

EXERCISE 1-11

(a)
Total assets (beginning of year) ......................................... £ 97,000
Total liabilities (beginning of year) ..................................... 63,000
Total equity (beginning of year).......................................... £ 34,000
(b)
Total equity (end of year) .................................................... £ 60,000
Total equity (beginning of year).......................................... 34,000
Increase in equity................................................................. £ 26,000
Total revenues ..................................................................... £215,000
Total expenses..................................................................... 155,000
Net income ........................................................................... £ 60,000
Increase in equity ........................................... £ 26,000
Less: Net income........................................... £(60,000)
Add: Error! Reference source not found.Dividends 44,000)
(16,000....................................................................)
Additional investment .................................... £ 10,000
(c)
Total assets (beginning of year) ......................................... £129,000
Total shareholders€ equity (beginning of year) ................. 75,000
Total liabilities (beginning of year)..................................... £ 54,000

(d)
Total equity (end of year) .................................................... £130,000
Total equity (beginning of year).......................................... 75,000
Increase in equity ................................................................ £ 55,000
Total revenues ..................................................................... £100,000
Total expenses..................................................................... 55,000
Net income ........................................................................... £ 45,000
Increase in equity ........................................... £ 55,000
Less: Net income........................................... £(45,000)
Additional investment ......................... (25,000) (70,000)
Dividends ........................................................ £ 15,000

EXERCISE 1-12

(a)

KAREN WEIGEL CO. LTD.

Income Statement

For the Year Ended December 31, 2017

Revenues

Service revenue .................................................... £62,500

Expenses

Salaries and wages expense ............................... £28,000

Rent expense ........................................................ 10,400

Utilities expense ................................................... 3,100

Advertising expenses............................................. 1,800

Total expenses .............................................. 43,300

Net income............................................................... £19,200

(b)
KAREN WEIGEL CO. LTD.
Comprehensive Income Statement
For the Year Ended December 31, 2017
Net income................................................................................ £19,200
Other comprehensive income ........................................................ 400
Comprehensive income ......................................................... £19,600

(c)
KAREN WEIGEL CO. LTD.
Retained Earnings Statement
For the Year Ended December 31, 2017
Retained earnings, January 1............................................. £48,000
Add: Error! Reference source not found.Net income ........... 19,200
67,200
Less: Dividends...................................................................... 5,000
Retained earnings, December 31 ....................................... £62,200