Chapter 1 Introduction to Accounting and Business

27

Cecil Jameson, Attorney-at-Law

Balance Sheet
July 31, 2013

Assets Liabilities
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $   6,873 Accounts payable . . . . . . . . . . . . . . . . . $ 2,355
Accounts receivable . . . . . . . . . . . . . . . 2,225 Stockholders’ Equity
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . 980 Capital stock . . . . . . . . . . . . . . . . . . . . . $13,700
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Retained earnings . . . . . . . . . . . . . . . . 4,023
Total assets . . . . . . . . . . . . . . . . . . . . . . . $20,078 Total stockholders’ equity . . . . . . . . . 17,723
Total liabilities and stockholders’
  equity . . . . . . . . . . . . . . . . . . . . . . . . $20,078

4. Optional.

Cecil Jameson, Attorney-at-Law

Statement of Cash Flows
For the Month Ended July 31, 2013

Cash flows from operating activities:

  Cash received from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,928*
  Deduct cash payments for operating expenses . . . . . . . . . . . . . . . . . . . . (3,755)**
  Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,173
Cash flows from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Cash flows from financing activities:
  Cash received from issuing capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,700
  Deduct cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (1,000)
  Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,700
Net increase in cash during year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,873

© Cengage Learning 2014

Cash as of July 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Cash as of July 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,873

*$6,928 = $3,928 + $3,000

**$3,755 = $1,055 + $1,200 + $1,500

Discussion Questions

1. Name some users of accounting information. a­ccepted the seller’s counteroffer of $167,500.
Describe how Reliable Repair Service should record
2. What is the role of accounting in business?
the land.
3. Why are most large companies like Microsoft,
6. a. 
Land with an assessed value of $750,000 for
PepsiCo, Caterpillar, and AutoZone organized as
property tax purposes is acquired by a busi-
corporations?
ness for $900,000. Ten years later, the plot of
4. Josh Reilly is the owner of Dispatch Delivery Ser- land has an assessed value of $1,200,000 and
vice. Recently Josh paid interest of $4,500 on a the business receives an offer of $2,000,000 for
personal loan of $75,000 that he used to begin the it. Should the monetary amount assigned to the
business. Should Dispatch Delivery Service record land in the business records now be increased?
the interest payment? Explain.
b. Assuming that the land acquired in (a) was sold
5. On July 12, Reliable Repair Service extended an offer for $2,125,000, how would the various elements
of $150,000 for land that had been priced for sale at of the accounting equation be affected?
$185,000. On September 3, Reliable Repair ­Service