Acc1000

At the beginning of the year, Hernandez Company had total assets of $800,000 and total liabilities of $500,000. Answer the following questions.

(a) If total assets increased $150,000 during the year and total liabilities decreased $80,000, what is the amount of owner's equity at the end of the year?

$

(b) During the year, total liabilities increased $100,000 and owner's equity decreased $70,000 What is the amount of total assets at the end of the year?

$

(c) If total assets decreased $80,000 and owner's equity increased $120,000 during the year, what is the amount of total liabilities at the end of the year?

$

Correct.

Incorrect.

(a) ($800,000 + $150,000) - ($500,000 - $80,000) = $530,000 (Owner's equity)

(b) ($500,000 + $100,000) + ($800,000 - $500,000 - $70,000) = $830,000 (Assets)

(c) ($800,000 - $80,000) - ($800,000 - $500,000 + $120,000) = $300,000 (Liabilities).

BE1-7

Presented below are three business transactions. For each transaction indicate whether there is an Increase, a Decrease or No Effect on the assets, the liabilities and the owner's equity.

Assets

Liabilities

Owner's Equity

(a) Invested cash in the business.

(b) Withdrawal of cash by owner.

(c) Received cash from a customer who had previously been billed for services provided.

Correct.

Incorrect.

BE1-8

Classify each of the following items as owner's drawing, revenue, or expense.

(a) Advertising expense

(b) Commission revenue

(c) Insurance expense

(d) Salaries Expense

(e) Bergman, Drawing

(f) Rent revenue

(g) Utilities expense

Correct.

Incorrect.

E1-7

Brandon Computer Timeshare Company entered into the following transactions during May 2010.

Instructions

Indicate with the appropriate letter whether each of...