Financial Accounting

Exercise 1-1 Types of Business Activities

1. Issued shares of stock to each of the four owners

2. Purchased two limousines

3. Paid first month’s rent for use of garage.

4. Obtained loan from local bank.

5. Received cash from customer for trip to the airport.

6. Paid driver first week’s wages.

7. Purchased 500-gallon fuel tank.

1) Financing

2) Investing

3) Operating

4) Financing

5) Operating

6) Operating

7) Investing

 Exercise 1-12 Accounting Principles and Assumptions

1.Genesis Corporation is now in its 30th year of

business. The founder of the company is planning to

retire at the end of the year and turn the business

over to his daughter.

2. Nordic Company purchased a 20-acre parcel of

property on which to build a new factory. The

company recorded the property on the records at

the amount of cash given to acquire it.

3. Jim Bailey enters into an agreement to operate a

New law firm in partnership with a friend. Each

Partner will make initial cash investment of

$10,000. Jim opens a checking account in the name

of the partnership and transfers $10,000 from his

personal account into the new account.

4. Multinational Corp. has a division in Japan. Prior to

preparing the financial statements for the company

and all of its foreign divisions, Multinational

translates the financial statements of its Japanese

division from yen to U.S. dollars.

5. Camden Company has always prepared financial

statements annually, with a year-end of June 30.

Because the company is going to sell its stock to the

public for the first time, quarterly financial reports

will also be required by the SEC.

1) Going concern

2) Cost Principle

3) Economic Entity

4) Monetary Unit

5) Time Period

Exercise 1-15 Users of Accounting Information and the Financial Statements

1) Stockholder How did this year’s sales compare to last year’s?

2) Banker How much debt does the company already have on its books?

3) Supplier How much does the company...