CHAPTER 1 ACCOUNTING IN ACTION SUMMARY...
CHAPTER 1 ACCOUNTING IN ACTION SUMMARY OF QUESTI
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CHAPTER 1 ACCOUNTING IN ACTION SU...
CHAPTER 1 ACCOUNTING IN ACTION SUMMARY OF QUESTI
Test Bank for Accounting Principles, Eighth Edition
1 - 32
Ex. 180
On June 1, 2008, Gore Company prepared a balance sheet that shows the following:
Assets (no cash)
................................................................
\$100,000
Liabilities
............................................................................
70,000
Owner's Equity
...................................................................
30,000
Shortly thereafter, all of the assets were sold for cash. How would the balance sheet appear
immediately after the sale of the assets for cash for each of the following cases?
Balances Immediately After Sale
the Assets
Assets
Liabilities
=
Owner's Equity
Cash A
\$110,000
\$________
\$________
\$________
Cash B
100,000
________
________
________
Cash C
90,000
________
________
________
Solution 180
(5 min.)
Balances Immediately After Sale
the Assets
Assets
Liabilities
=
Owner's Equity
Cash A
\$110,000
\$110,000
\$70,000
\$40,000
Cash B
100,000
100,000
70,000
30,000
Cash C
90,000
90,000
70,000
20,000
Ex. 181
At the beginning of 2008, Clemens Company had total assets of \$550,000 and total liabilities of
\$330,000. Answer each of the following questions.
1. If total assets increased \$60,000 and owner's equity decreased \$90,000 during the year,
determine the amount of total liabilities at the end of the year.
2. During the year, total liabilities decreased \$75,000 and owner's equity increased \$50,000.
Compute the amount of total assets at the end of the year.
3. If total assets decreased \$100,000 and total liabilities increased \$55,000 during the year,
determine the amount of owner's equity at the end of the year.
Solution 181
(5 min.)
1.
Ending Total Liabilities = (\$550,000 + \$60,000) – (\$550,000 – \$330,000 - \$90,000)
= \$610,000 – \$130,000 = \$480,000
2.
Ending Total Assets = (\$330,000 – \$75,000) + (\$550,000 – \$330,000 + \$50,000)
= \$255,000 + \$270,000 = \$525,000
3.
Ending Owner's Equity = (\$550,000 – \$100,000) – (\$330,000 + \$55,000)
= \$450,000 – \$385,000 = \$65,000
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