Discussion

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Acc205 Week 1 Discussion

1.    Accounting and the Business Environment

From Chapter 1, complete E1-21 and E1-26 and post to the discussion board by Day 3. Remember to complete all parts of the problems and report back to the group the results of your analysis. Do not forget to show the necessary steps and explain how you attained that outcome. Respond to at least two of your classmates’ postings.

E1-21      Indicate the effects of the following business transactions on the accounting equation of a Blockbuster Video location. Transaction (a) is answered as a guide.

a.   Received cash of $10,000 from the owner, who was investing in the business.

Answer: Increase asset (Cash)

Increase owner’s equity (Capital)

b. Earned video rental revenue on account, $1,200.

c.  Purchased office furniture on account, $600.

d. Received cash on account, $300.

e. Paid cash on account, $250.

f.  Sold land for $12,000, which was the cost of the land.

g. Rented videos and received cash of $600.

h. Paid monthly office rent of $800.

i.  Paid $100 cash to purchase supplies.

E1-26

In this exercise you will practice using the data of a well-known company with the amounts rounded. The 2004 annual report of UPS, the overnight shipping company, reported revenue of $32 billion. Total expenses for the year were $29 billion. UPS ended the year with total assets of $33 billion, and it owed debts totaling $17 billion. At year-end 2003, UPS reported total assets of $30 billion and total liabilities of $17 billion.

1. Compute UPS’s net income for 2004.

2. Did UPS’s owners’ equity increase or decrease during 2004? By how much?

3. How would you rate UPS’s performance for 2004—good or bad? Give your reason. (Challenge)

2.    Recording Business Transactions

From Chapter 2, answer E2-15 and P2-31A and post to the discussion board by day 3. Respond to at least two of your classmates’ postings.

E2-15      Link Back to Chapter 1 (Accounting Equation). Bob’s Cream Soda makes specialty soft drinks. At the end of 2008, Bob’s had total assets of $180,000 and liabilities totaling $100,000.

Requirements

1.   Write the company’s accounting equation, and label each amount as a debit or a credit.

2.   Bob’s total revenues for 2006 were $240,000, and total expenses for the year were $200,000. How much was Bob’s net income (or net loss) for 2008? Write the equation to compute the company’s net income, and indicate which element is a debit and which is a credit. Does net income represent a net debit or a net credit? Review Exhibit 1-8, Page 20, if needed.

P2-31A  Analyzing and journalizing transactions

Showtime Amusements owns movie theaters. Showtime engaged in the following business transactions:

July 1   Darrell Palusky invested $350,000 personal cash in the business by depositing that amount in a bank account titled Showtime Amusements. The business gave Palusky owner’s equity in the company.

2    Paid $300,000 cash to purchase a theater building.

5    Borrowed $220,000 from the bank. Palusky signed a note payable to the bank in the name of Showtime Amusements.

10   Purchased theater supplies on account, $1,700.

15   Paid $800 on account.

15   Paid property tax expense on theater building, $1,200.

16   Paid employee salaries, $2,800, and rent on equipment, $1,800. Make a single compound entry.

28   Withdrew $6,000 from the business for personal use.

31   Received $20,000 cash from service revenue and deposited that amount in the bank.

Showtime Amusements uses the following accounts: Cash; Supplies; Building; Accounts Payable; Notes Payable; Darrel Palusky, Capital; Darrel Palusky, Withdrawals; Service Revenue; Salary Expense; Rent Expense; Property Tax Expense.

Requirement

Journalize each transaction of Showtime Amusements as shown for July 1. Explanations are not required.

 

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