Chapter One
Challenge Exercise 1
Expands on: E1-7
LO: 6, 7
Wunderkind Photography entered into the following transactions during February 2015.
1. Stockholders invested $5,000 in the business.
2. Bought photography equipment for a cash payment of $1,000.
3. Bought more photography equipment by signing a $500 note payable.
4. Performed photography services for $400 cash.
5. Performed photograph services, and billed the customer $900 on account.
6. Collected $900 from the customer in item 5.
7. Paid for February developing and printing, $150.
8. Advertised the business in the Platteville Journal. The $100 cost will be billed to
Wunderkind.
9. Paid the advertising bill from item 8.
10.Paid $200 for photography supplies.
11.Received $300 cash advance payment from a customer for a photography job to be
performed in April.
12.Paid $250 dividend to the stockholders.
13.
Instructions:
A. Indicate whether each transaction increases or decreases assets, liabilities, or
stockholders equity. As an example, item one would be: increase assets and increase
stockholders equity.
B. Ignoring dollar amounts, explain what transactions 4 and 5 have in common, and how
they differ.
C. Ignoring dollar amounts, explain what transactions 7 and 8 have in common, and how
they differ.
D. Ignoring dollar amounts, explain what transactions 4 and 11 have in common, and how
they differ.
Copyright 2014 John Wiley & Sons, Inc.
(For Instructor Use Only)
Weygandt, Financial Accounting, Challenge Exercises
Page 1-1
Challenge Exercise 2
Expands on: E1-10
LO: 6, 7
The total assets and liabilities of Robot Company at January 1 and December 31, 2015 are
presented below.
January 1
December 31
Assets
$76,000
$112,000
Liabilities
26,000
28,800
Instructions:
1. Assume dividends of $10,800 were paid and no additional stock was issued during the
year. Revenues were $110,000. Compute (a) net income, and (b) expenses.
2. Assume additional stock was issued for $4,800 and no dividends were paid during the
year. Expenses were $42,000. Compute (a) net income, and (b) revenues.
3. Assume additional stock was issued for $62,000 and dividends of $15,600 were paid
during the year. Compute net income.
4. Assume additional stock was issued for $6,000, and net income was $51,000. Compute
dividends paid.
Copyright 2014 John Wiley & Sons, Inc.
(For Instructor Use Only)
Weygandt, Financial Accounting, Challenge Exercises
Page 1-2
Challenge Exercise 3
Expands on: E1-12, E1-14
LO: 8
Seattle Service had the following financial information at the end of 2015.
1/1/15
Accounts Payable
Accounts Receivable
Advertising Expense
Cash
Common Stock
Dividends
Equipment
Notes Payable
Rent Expense
Retained Earnings
Salaries and Wages Expense
Service Revenue
Utilities Expense
2015
12/31/15
$15,000
20,000
$ 1,000
11,000
15,000
9,000
33,000
20,000
3,500
$6,000
16,000
40,000
2,500
Instructions:
Prepare a 2015 income statement, 2015 statement of retained earnings, and a 12/31/15
balance sheet for Seattle Service.
Copyright 2014 John Wiley & Sons, Inc.
(For Instructor Use Only)
Weygandt, Financial Accounting, Challenge Exercises
Page 1-3
