Categorize the accounting tasks performed by Urlacher as relating to either the identification (I), recording (R), or communication (C) aspects of accounting. E1-2 (a) The following are users of financial statements. ___I___Customers __I___Securities and Exchange Commission ___C__Internal Revenue Service __C__Store manager ___I___Labor unions __R__Suppliers ___C__Marketing manager __C_ Vice-president of finance ___R__Production superviso Instructions
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Identify the users as being either external users or internal users. (b) The following questions could be asked by an internal user or an external user. __INTERNAL USERS__ Can we afford to give our employees a pay raise? __EXTERNAL USERS__Did the company earn a satisfactory income? __INTERNAL USERS___Do we need to borrow in the near future? __EXTERNAL USERS__How does the company’s profitability compare to other companies? _ INTERNAL USERS____What does it cost us to manufacture each unit produced? _ INTERNAL USERS____Which product should we emphasize? _EXTERNAL USERS___Will the company be able to pay its short-term debts? Instructions For each of the three situations, say if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated. E1-5 Meredith Cleaners has the following balance sheet items. Accounts payable Cash- incorrect- is an asset for the company is not something than the company needs to paid for to keep the company going.
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Salaries payable – Correct-is an expense that the company need to paid to keep the company running. Cleaning supplies – Correct-the need cleaning supplies to keep their company clean and it is an expense. Accounts receivable Notes payable – incorrect- is and that is borrowed from the bank to run the business Common stock – correct- is an income for the company. Cleaning equipment – Correct- is something company used to bring in income for the company. Instructions Determine the missing amounts. E1-12 The following information relates to Linda Stanley Co. or the year 2008. Income Statement Revenues Service revenue 62,500 Expense Advertising expense $ 1,800 Rent expense 10,400 Utilities expense 3,100 Salaries expense 30,000 Total expense 45300 Net Income 17200
Linda Stanley Co. for the year 2008. Retained Ended Statement Retained earnings, January 1, 2008 $ 48,000 Net Income 17,200 30800 Dividends during 2008 6,000 Retained earnings, 2008 24,800 Instructions After analyzing the data, prepare an income statement and a retained earnings statement for the year ending December 31, 2008. E1-13 Mary Close is the bookkeeper for Mendez Company.
Mary has been trying to get the balance sheet of Mendez Company to balance. Mendez’s balance sheet is shown on page 37. Identify each statement as true or false. If false, indicate how to correct the statement. E2-2 Selected transactions for D. Reyes, Inc. , an interior decorating firm, in its first month of business, are as follows. Jan. 2 Invested $10,000 cash in the business in exchange for common stock. 3 Purchased used car for $4,000 cash for use in business. 9 Purchased supplies on account for $500. 11 Billed customers $1,800 for services performed. 6 Paid $200 cash for advertising. 20 Received $700 cash from customers billed on January 11. 23 Paid creditor $300 cash on balance owed. 28 Declared and paid a $1,000 cash dividend. Instructions For each transaction indicate the following. (a) The basic type of account debited and credited (asset, liability, stockholders’ equity). (b) The specific account debited and credited (cash, rent expense, service revenue, etc. ). (c) Whether the specific account is increased or decreased. (d) The normal balance of the specific account