Exercise 1-6A A. $1,000 cash + $9,000 land = $4,000 + $6,000 B. 40% creditors C. 60% stock holder’s equity D. No. They only have $1,000 in cash. They would have to sell their land in order to do this.

Exercise 1-7A A. They are paid to investors. They are not expenses. Assets distributed to stockholders are not used for the purpose of generating revenue. B. $1,000 C. $800, it is all the cash they have at this time. D. Yes, but they would have to sale their land or liquidate. E. Creditors would receive what is left. $800 in cash and the investors would get nothing.

Exercise 1-8A A. $142,000 B. $15,000 C. $25,000 D. $55,000

Exercise 1-9A A. $18,000 B.

C.

D.

E. Beginning/Ending Cash Balance= $156,000/$169,000
Beginning/Ending Common Stock=$52,400/$52,400

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The balances of cash differ because there were transactions that were made, revenue, expenses, and dividends. Common Stock did not change because assets distributed to stock holders are not used for purposes of generating revenue and dividends are not an expenses. The dividends are a transfer of earnings, not a return of the assets acquired from the issue of common stock.

Exercise 1-11A A.

B.

C. Assets = $96,000

Liabilities = $30,000

Stockholders’ equity = $30,000

Exercise 1-12A A.

B. -------------------------------------------------
No. The number of accounts depends on the level of information that the managers need to make decisions.

Respond to the following:

1. Why is the knowledge of accounting concepts and terminology useful to anyone in a business activity? Generally, most people who work for a business or manage one at some point in time will have some financial responsibilities. This could be a budget or