CHAPTER 1 \E1-1 Urlacher Company performs the following accounting tasks during the year.

______Analyzing and interpreting information. ______Classifying economic events. ______Explaining uses, meaning, and limitations of data. ______Keeping a systematic chronological diary of events. ______Measuring events in dollars and cents. ______Preparing accounting reports. Determine effect of transactions on basic accounting equation. (SO 7) 34 Chapter 1 Accounting in Action ______Reporting information in a standard format. ______Selecting economic activities relevant to the company. ______Summarizing economic events. Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users. Instructions For each of the three situations, say if the accounting method used is correct or incorrect. If correct, identify which principle or assumption supports the method used. If incorrect, identify which principle or assumption has been violated. E1-5 Meredith Cleaners has the following balance sheet items. Accounts payable Accounts receivable Cash Notes payable Cleaning equipment Salaries payable Cleaning supplies Common stock Instructions Determine the missing amounts. E1-12 The following information relates to Linda Stanley Co. for the year 2008. Retained earnings, January 1, 2008 $ 48,000 advertising expense $ 1,800 Dividends during 2008 6,000 Rent expense 10,400 Service revenue 62,500 Utilities expense 3,100 Salaries expense 30,000 Instructions After analyzing the data, prepare an income statement and a retained earnings statement for the year ending December 31, 2008. Instructions

After analyzing the data, prepare an income statement and a retained earnings statement for the Year ending December 31, 2008. E1-13 Mary Close is the bookkeeper for Mendez Company. Mary has been trying to get the Balance sheet of Mendez Company to balance. Mendezs balance sheet is shown on page 37. Prepare income statement and Retained earnings statement. (SO 8) MENDEZ COMPANY Balance Sheet December 31, 2008 Assets Liabilities Cash $15,000 Accounts payable $20,000 Supplies 8,000 Accounts receivable (8,500) Equipment 46,000 Common stock 50,000 Dividends 10,000 Retained earnings 17,500 Total assets $79,000 Total liabilities and stockholders equity $79,000 CHAPTER2 Instructions Identify each statement as true or false. If false, indicate how to correct the statement. E2-2 Selected transactions for D. Reyes, Inc., an interior decorating firm, in its first month of business, are as follows. Jan. 2 Invested $10,000 cash in the business in exchange for common stock. 3 Purchased used car for $4,000 cash for use in business. 9 Purchased supplies on account for $500. 11 Billed customers $1,800 for services performed. 16 Paid $200 cash for advertising. 20 Received $700 cash from customers billed on January 11. 23 Paid creditor $300 cash on balance owed. 28 Declared and paid a $1,000 cash dividend. Instructions For each transaction indicate the following. (a) The basic type of account debited and credited (asset, liability, stockholders equity). (b) The specific account debited and credited (cash, rent expense, service revenue, etc.). (c) Whether the specific account is increased or decreased. (d) The normal balance of the specific account. Post journal entries to standard form of account. (SO 6) Use the following format, in which the January 2 transaction is given as an example.

Account Debited Account Credited (a) (b) (c) (d) (a) (b) (c) (d) Basic Specific Normal Basic Specific Normal Date Type Account Effect Balance Type Account Effect Balance Jan. 2 Asset Cash Increase Debit Stock- Common Increase Credit holders Stock Equity E2-3 Data for D. Reyes, Inc., interior decorating, are presented in E2-2.

Chapter 7 Instructions In each of the situations above, identify the assumption, principle, or constraint that has been violated, if any. Discuss the appropriateness of the journal entries, and give the correct journal entry, if necessary. E7-3 Presented below are the assumptions, principles, and constraints discussed in this chapter. 1. Economic entity assumption 6. Matching principle 2. Going concern assumption 7. Full disclosure principle 3. Monetary unit assumption 8. Revenue recognition principle 4. Time period assumption 9. Materiality 5. Cost principle 10. Conservatism Instructions Identify by number the accounting assumption, principle, or constraint on page 323 that describes each situation below. Do not use a number more than once. (a) Is the rationale for why plant assets are not reported at liquidation value. (Do not use historical cost principle.) (b) Indicates that personal and business record-keeping should be separately maintained. (c) Ensures that all relevant financial information is reported. (d) Assumes that the dollar is the measuring stick used to report on financial performance. (e) Requires that the operational guidelines be followed for all significant items. (f ) Separates financial information into time periods for reporting purpose. (g) Requires recognition of expenses in the same period as related revenues. (h) Indicates that market value changes subsequent to purchase are not recorded in the accounts.