Accounting Question

1)
Montgomery Company experienced the following events during Year 1 (all were
cash events):
a. Issued common stock for cash
b. Purchased equipment for both cash and signed a note
c. Paid operating expenses
d. Paid a dividend
e. Sold services on account
f. Sold services for cash
g. Received cash for services to be performed in the future
Required:
Indicate how each of these events affects the accounting equation by writing the
letter “I” for increase, the letter “D” for decrease, and “NA” for no effect under
each of the components of the accounting equation. Use only one item of entry in
each column. (The effects of the first event are shown below.)
Stockholders’ Equity
Event
number
1.
Assets
I
=
Liabilities
NA
+
Common
Stock
I
+
Retained
Earnings
NA
2)
Journalize the following transaction: ABC performed $300,000 worth of services. ABC
collected $100,000 in cash and is owed the remainder.
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3 The following transactions apply to the Garber Corporation for Year 1, its first year in
business.
1) Issued stock to investors, $190,000.
2) The company borrowed $192,000 cash from the bank.
3) Services were provided to customers for $160,000 cash.
4) The company acquired land for $44,000 cash.
5) The company paid $34,000 in cash for rent expense.
6) The company paid $3,200 for supplies that were used during the period.
7) A dividend of $1,000 was paid to the owners.
8) Repaid $50,000 of the loan described in item 2.
Required:
Prepare an income statement, statement of changes in retained earnings, and balance sheet for
Year
4. Indicate whether each of the following statements is (generally) true or false.
________ a) A debit may increase a liability.
________ b) Closing a revenue account includes a debit to retained earnings.
________ c) A debit may decrease stockholders’ equity.
________ d) A credit may decrease an asset.
5. Define what GAAP is
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6)
Stuart Corporation entered into the following transactions during the year ending
December 31, Year 2: at the end of year 1: Cash balance was $100,000. Common Stock was
$20,000 and Retained Earnings was $80,000. In year 2 the following transactions occurred:
1) Performed services for $26,000 cash
2) Purchased $800 of supplies on account (use asset account for supplies)
3) Purchased land for $95,000 cash
4) Paid salaries expense of $16,500
5) Paid for $600 of the supplies purchased in event (2)
6) Collected $15,000 in advance for services to be provided evenly over the next 12 months
7) Recognized $10,000 of revenue on the contract from event (6)
8) Owed $5,500 of salaries expenses to employees for work done during December, that will be
paid during January, Year 3.
9) Tax rate is 20%
Required:
Prepare the journal entries for these transactions and adjustments using the general journal
format. Prepare Financial Statements. Prepare closing entries.
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