Financial Accounting

Exercise 1-1 Types of Business Activities

• Issued shares of stock to each of the four owners. Financing

• Purchased two limousines. Investing

• Paid first month’s rent for use of garage. Operating

• Obtained loan from local bank. Financing

• Received cash from customer for trip to the airport. Operating

• Paid driver first week’s wages. Operating

• Purchased 500-gallon fuel tank. Investing

Exercise 1-12 Accounting Principles and Assumptions

• 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. Going Concern

• 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. Cost Principle

• Jim Bailey enters into an agreement to operate a new law firm in partnership with a friend. Each partner will make an 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. Economic entity

• 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. Monetary unit

• 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. Time period

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

• How did this year’s sales compare to last years? IS

• How much debt does the company already have on its books? BS

• How much does the company currently owe to its suppliers? BS

• How much did the company pay in dividends this past year? RE

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