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Chapter 1 Introduction to Accounting and Business

7. Describe the difference between an account receiv- 10. The financial statements are interrelated. (a) What
able and an account payable. item of financial or operating data appears on
both the income statement and the retained earn-
8. A business had revenues of $679,000 and ­operating
ings statement? (b) What item appears on both the
expenses of $588,000. Did the business (a) ­incur a
balance sheet and the retained earnings statement?
net loss or (b) realize net income?
(c) What item appears on both the balance sheet
9. A business had revenues of $640,000 and ­operating and the statement of cash flows?
expenses of $715,000. Did the business (a) incur a
net loss or (b) realize net income?

Practice Exercises
Example
Exercises
EE 1-1 p. 8 PE 1-1A  Cost concept OBJ. 2
On May 19, Integrity Repair Service extended an offer of $335,000 for land that had
been priced for sale at $363,000. On June 4, Integrity Repair Service accepted the seller’s
counteroffer of $345,000. On October 10, the land was assessed at a value of $290,000
for property tax purposes. On February 5 of the next year, Integrity Repair Service was
offered $380,000 for the land by a national retail chain. At what value should the land
be recorded in Integrity Repair Service’s records?

EE 1-1 p. 8 PE 1-1B  Cost concept OBJ. 2

On March 31, Higgins Repair Service extended an offer of $415,000 for land that had
been priced for sale at $460,000. On April 15, Higgins Repair Service accepted the seller’s
counteroffer of $437,500. On September 9, the land was assessed at a value of $375,000
for property tax purposes. On December 8, Higgins Repair Service was offered $475,000
for the land by a national retail chain. At what value should the land be recorded in
Higgins Repair Service’s records?

EE 1-2 p. 9 PE 1-2A  Accounting equation OBJ. 3

Ultima is a motivational consulting business. At the end of its accounting period, December
31, 2013, Ultima has assets of $942,000 and liabilities of $584,000. Using the accounting
equation, determine the following amounts:
a. Stockholders’ equity as of December 31, 2013.
b. Stocholders’ equity as of December 31, 2014, assuming that assets increased by $113,000
and liabilities increased by $44,000 during 2014.

EE 1-2 p. 9 PE 1-2B  Accounting equation OBJ. 3

Be-The-One is a motivational consulting business. At the end of its accounting period,
December 31, 2013, Be-The-One has assets of $395,000 and liabilities of $97,000. Using
the accounting equation, determine the following amounts:
a. Stockholders’ equity as of December 31, 2013.
b. Stockholders’ equity as of December 31, 2014, assuming that assets decreased by
$65,000 and liabilities increased by $36,000 during 2014.

EE 1-3 p. 14 PE 1-3A  Transactions OBJ. 4

Arrowhead Delivery Service is owned and operated by Gates Deeter. The following se-
lected transactions were completed by Arrowhead Delivery Service during August:
1. Received cash in exchange for capital stock, $25,000.
2. Paid creditors on account, $3,750.