1. Leonetta Garcetti owns and manages a large construction company.

This morning she is faced with the following a. The office manager just submitted his resignation and the search for a replacement must be organized. b. A loan officer from the companys bank just phoned saying that the companys application for a !""#""" loan has been appro$ed. c. %ids from se$eral $endors ha$e been recei$ed regarding installation of a new computerized information system. &ne proposal must be selected d. %ecause the new bank loan has been appro$ed# two short term loans can be paid off. e. &ld furniture is awaiting disposal. f. A long time customer is unhappy with the firms latest architectural drawings for a new shopping center comple'. g. A new construction crane is being purchased. h. An in$estor has approached Leonetta offering to purchase (") of her company in e'change for cash. i. The firm is considering the purchase of e'clusi$e regional rights to a patented construction process. j. &ne of the companys customers is behind on scheduled payments. The amounts are large and Leonetta must decide whether to suspend construction on the project in$ol$ed. *dentify each of the issues abo$e as in$ol$ing a financing acti$ity# an in$esting acti$ity# or an operating acti$ity. (. The fashion +tatement *nc. distributes perfumes and cosmetics. The following account changes were made in the companys accounting records during ,arch. -or each item# describe the transaction that caused the changes. The first item has been completed as an e'ample. a. .ash increased 1/#"""0 .ontributed .apital increased 1/#""". Answer1 The owners in$ested 1/#""" in the company b. c. d. e. 23uipment increased 1(#"""0 .ash decreased 1(#""". .ash decreased /#4""0 5otes payable decreased /#4"" +upplies in$entory increased 16#4"" 0 .ash decreased 16#4"" ,erchandise *n$entory decreased 1"#"""0 .ost of Goods +old increased 1"#""". f. .ash increased (6#4""0 +ales 7e$enue increased (6#""" g. +upplies 2'pense increased 6#"""0 +upplies in$entory decreased 6#""" 6. %alance sheet accounts for 8ales 8elightful -lorist +hoppe at the end of a recent fiscal year are listed below. 9repare a schedule demonstrating that assets : liabilities ; owners e3uity for the company +upplies *n$entory !# 64"

%uildings <=# 4"" .ash 1# 4"" 23uipment 1(# <4" -lowers and 9lants (>#""" 5otes 9ayable 4<# 4"" 9roprietors .apital >># >"" !. After si' months of operation# %rothers Lawn +er$ice had the following re$enue and e'pense account balances +upplies e'pense !#""" ?ages e'pense >#""" +er$ice re$enue 1(#6"" @tilities e'pense 4"" 7ent e'pense 1#""" 9repare an income statement for %rothers Lawn +er$ice for the first si' months of operations that ended Aune 6". 4. Apollo .orporation reported the following accounts and balances in its financial statements .ash 1"#""" ,erchandise *n$entory 6"#""" 23uipment !4#""" 5otes 9ayable ("#""" .ontributed .apital 64#""" 7etained 2arnings 6"#""" Arrange the accounts and balances into the accounting e3uation as shown below Assets : Liabilities ; 23uity >. 7andi had a hard time finding a summer job when she went home from college# so she decided to go into business for herself mowing lawns. +he had the following business acti$ities during the month of Aune Aune 1 @sed 6"" of her own money and borrowed !4" from her father to start the business. Aune ( 7ented a used pickup truck from an uncle for /4 per month. 9aid for the first months use. Aune 6 7ented a lawnmower B <4 per monthC# an edgerB 4" per monthC# and a wheelbarrow B 1= per monthC at an e3uipment rental store. 9aid the first months rental fees in full. Aune 1> 8uring the first two weeks# performed >4" of lawnDmowing ser$ices. .ustomers paid in cash. 9aid out >< for gas# oil# and other supplies. Aune 1/ 9aid <" for a newspaper ad$ertisement that had appeared earlier in the month.

Aune 6" 8uring the last half of the month# performed 4"< of lawn mowing ser$ice and collected the cash. Aune 6" 9aid out 1"4 for gas# oil# and other supplies Aune 6" 9aid back one half of the amount she borrowed from her father plus 4 for interest. 7andi knew from taking an accounting class at college that the following accounts would be needed to keep track of her business acti$ities. .ash 23uipment 7ental 2'pense 5ote payable .ontributed .apital +er$ice 7e$enue 7etained 2arnings Gas and &il 2'pense Ad$ertising 2'pense A. +how how each e$ent would be entered into the accounting system %. 9repare an income statement for 7andis Lawn mowing ser$ice for the month of Aune .. 9repare a balance sheet as of Aune 6" 8. 8id 7andi make a smart decision when she started her won businessE ?hat factors might be considered in making that e$aluationE <. 7efer to the information about financial statements below 1. The statement pro$ides information about resources consumed during an accounting period. (. The statement is dated as of a specific point in time. 6. The amounts that are owed to other organizations or indi$iduals are reported. !. The total amount of capital that has been contributed to the organization is reported. 4. The cash used for in$esting acti$ities is reported >. *nformation is reported regarding the rewards that ha$e been earned from ser$ing customers during the accounting period just ended. <. The cash recei$ed from financing acti$ities is reported /. The statement is not as of a specific date# but co$ers a period of time. =. The statement contains information about the financial obligations that were made to ac3uire resources 1". The statement reports cash inflows and outflows. -or each item abo$e# indicate the financial statement for which the information is true. @se I to indicate income statement, B to indicate balance sheet# C to indicate cash flow statement. *f an item is not true for any of the three financial statements# indicate with an N. /. +urfD The .com had the following e$ents occur during &ctober 1. 9aid 4#/"" utilities (. ,ade cash sales to customers that totaled /=#!>". The merchandise had cost the +urfD TheD 5et.com >"#""" 6. 9aid (/# >"" for new e3uipment

!. 7epaid !#="" that was borrowed from a bank 4. %orrowed >4#""" from local bank >. 9aid 4=# !6" to employees for salaries <. 9aid 11#="" for maintenance and repair /. 7ecei$ed !/# >"" from in$estors =. 9aid 6#<4" for supplies that were used. -or each transaction record the transaction using the debit and credit format. =. -or about a year# -rank 9oppa has been operating a hot dog stand in the parking lot of a major discount retailer in a suburban area. The stand appears to be a pushcart but is actually a small trailer that is towed from home each day. -rank cle$erly designed the stand to include storage compartments# napkins# and the like. ?hat started out as a weekend gig to pick up a few e'tra bucks has turned into a fullDtime occupation. -rank soon found that on a hot summer day# he could easily take in more than 1#""" from sales of a full line of fancy hot dogs and cold sodas. About ! months ago# -rank decided to e'pand to more locations. Fe found that large discount retailers were 3uite happy to pro$ide him ade3uate space near the front door because customers enjoyed the con$enience and the stand helped build traffic for the retailer. -rank formed 9oppas 8ogs .ompany and negotiated contracts with se$eral retailers to pro$ide pushcart operations outside their stores. The contracts generally call for 9oppas 8ogs to pay a location fee to the retailer plus 6) of the pushcarts sales. -rank plans to be $ery careful when hiring the people necessary to operate the fi$e new pushcart locations. Fe is confident that he can assess good moral character and a$oid hiring anyone who would take ad$antage of him. -rank will ha$e to spend about 6#""" for each new pushcart and related e3uipment. *n addition# he will ha$e to finance an in$entory of hot dogs# condiments# and sodas for each location. A local bank has agreed to pro$ide financing. @ntil now# -rank has maintained an informal accounting system consisting of an en$elope full of receipts and his personal checking accounts. The system has ser$ed him well enough so far# but he is finding that more and more he is getting his personal financial acti$ities confused with those of his business. -rank is positi$e that the business is profitable because he seems to ha$e more money left at the end of the month than he did when he was working full time as an auto mechanic. Fe has decided he needs a better accounting system and has decided to consult with a .9A Fe knows to see what she might recommend. 1. ?hat information does -ranks current accounting system pro$ide himE (. ?hat additional information should -rank want from an impro$ed accounting systemE 6. ,ake recommendations to -rank regarding how he can impro$e his accounting system and identify a chart BlistC of accounts that you would e'pect to find in -ranks new accounting system. !. -or each account# identify whether it is an asset# liability#

owners e3uity# re$enue# or e'pense.