ASSIGNMENT I

Accounting for Managerial Decisions

Date for Submission: Monday, April 03, 2017

General Instructions:
1. You are required to submit them in the A-4 Sized Papers.

2. No Plagiarism is expected, if found negative score in participation for

first time and F grade shall be given in the course.

3. You can discuss with your friends, seniors and the faculty (both in the
class and outside class) for all doubts and make sure that you learn it
before the submission.

4. Please submit it to your CR and CR is required to ensure the

submission from all participants.

QUESTION 1 [1.5]
At the end of the year the following information was extracted from the records of Pebble
Bridge Inc.:
Accounts Payable $10,000 Revenues
$50,000
Accounts Receivable 9,000 Office Equipment
15,000
Capital Stock 16,000 Rent Expense
13,000
Cash 26,000 Retained Earnings, beginning of the
year 17,000
Dividend paid during the year 6,000 Salary and Wage expense
24,000
Required
Use the above information to answer the following questions:
i. What is Pebble Bridges net income for the year?
ii. What is Pebble Bridges Retained Earning balance at the end of the year?
iii. What is the total amount of Pebble Bridges assets at the end of the year?
iv. What is the total amount of Pebble Bridges liabilities at the end of the year?
v. How much owners equity does Pebble Bridge have at the end of the year?
vi. What is Pebble Bridges accounting equation at the end of the year?

QUESTION 2 [1.5]
George Einstein opened a ceramic studio in leased retail space, paying the first months
rent of $300 and a $1,000 security deposit with a check on her personal account. She
took molds and paint, worth about $7,500, from her home to the studio. She also bought
a new firing kiln to start the business. The new kiln had a price list of $5,000, but George
was able to trade in her old kiln, worth $500 at the time of trade, on the new kiln.
Therefore, she paid only $4,500 cash. She wrote a check on her personal account.
Georges first customer paid a total of $1,400 to attend the classes for next two months.
George opened a checking account in the companys name with the $1,400. She has
conducted classes for one month and has sold $3,000 of unfinished ceramic pieces
called greenware. All greenware sales are cash. George incurred $1,000 of personal cost
in making the greenware. At the end of the month, George prepared the following
balance sheet and income statement.
Georges Ceramic Studio
Balance Sheet
August 31, 2016
Cash $1,400
Kiln 5,000 Equity $6,400
 Total $6,400 Total $6,400

Georges Ceramic Studio

Income Statement
For the month ended August 31, 2016
Sales $4,400
Rent $300
Supplies 600 900
Net income $3,500
George needs to earn at least $3,000 each month for the business to be worth her time.
She is pleased with the results.
Required
Identify the assumptions that George has violated and explain how each event should
have been handled. Prepare a corrected balance sheet and income statement.

QUESTION 3 [1]
Maynard Corporation reported the following current accounts at the end of two recent years:[1]
December 31, 2016 December 31, 2015
Cash $ 3000 $ 6000
Accounts receivable 15000 10,000
Inventory 12000 8000
Accounts payable 12000 7000
Salary payable 2000 1000
Notes payable 6000 4000
Required:
a. Compute Maynards current ratio at the end of each of the two years.
b. How has the companys liquidity changed at the end of 2016 compared to the end of 2015?
c. Comment on the relative composition of Maynards current assets at the end of 2016 compared to the
end of 2015.

QUESTION 4 [2]
Riverside Typhoons Inc. is a minor league baseball organization that has just completed
its first season. You and four other investors organized the corporation; each put $10,000
in cash for shares of capital stock. Because you live out of state, you have not been
actively involved in the daily affairs of the club. However, you are thrilled to receive a
dividend check for $10,000 at the end of the season- an amount equal to our original
investment. Included with the check are the following financial statements, along with
supporting explanations:
 Riverside Typhoons Inc.
Income statement
For the year ended December 31, 2014
Revenues:
Single-game ticket revenue $420,000
Season ticket revenue 140,000
Concession revenue 280,000
Advertising revenue 100,000 $940,000
Expenses:
Cost of concessions sold $110,000
Salary expense-players 225,000
Salary and wage expense-staff 150,000
Rent expense 210,000 $695,000
$245,000

Riverside Typhoons Inc.

Statement of Retained Earnings
For the Year Ended December 31, 2014
Beginning balance, January 1, 2014 $ 0
Add: Net income for 2014 245,000
Deduct: Cash dividends paid in 2014 (40,000)
Ending balance, December 31, 2014 $205,000

Riverside Typhoons Inc.

Balance Sheet
December 31, 2014
Assets Liabilities and
Shareholders Equity
Cash $5,000 Notes payable $50,000
Accounts receivable:
 Season tickets 140,000 Capital stock 40,000
Advertisers 100,000 Additional Owners Capital 80,000
Auxiliary assets 80,000 Parent Clubs unity 125,000
Equipment 50,000 Retained Earnings 205,000
Player contracts 125,000 Total liabilities and
Total Assets $500,000 stockholders equity $500,000
Additional Information
i. Single-game tickets sold for $4 per game. The team averaged 1,500 fans per
game. With 70 home games x $4 per game x 1,500 fans, single game ticket
revenue amounted to $420,000.
ii. No season tickets were sold during the first season. During the last three months of
2014, however, an aggressive sales campaign resulted in the sale of 500 season
tickets for the year 2015 season. Therefore, the controller (who is one of the
owners) choose to record an Accounts Receivable-Season Tickets and
corresponding revenue for 500 tickets x $4 per game x 70 games, or $140,000.
iii. Advertising revenue of $100,000 resulted from the sale of the 40 signs of the
outfield wall at $2,500 each for the season. However, none of the advertisers have
paid their bills yet (thus an accounts receivable of $100,000 on the balance sheet)
because the contract with Riverside required payment only if the team average
2,000 per game during 2014 season. The controllers believe that the advertisers
will be sympathetic to the difficulties of starting a new franchise and will be willing
to overlook the slight deficiencies in the attendance requirement.
iv. Riverside Typhoons has a working agreement with one of the major league
franchises. The minor league team is required to pat $5,000 every year to the
major league team for each of the 25 players on its roster. The controller believes
that each of the players in an asset to the organization and has therefore recorded
$5,000 x 25, or 125,000, as an asset called Players Contracts. The item on the
right side of the balance sheet entitled Parent Clubs Equity is the amount owed to
the major league team by February 1, 2015, as payment for the players for the
2014 season.
v. In addition to the cost described in item (IV), Riverside directly pays each of the
players a $9,000 salary for the season. The amount-$225,000- has already been
paid for the 2014 season and is reported on the income statement.
vi. The items on the balance sheet entitled Auxiliary Assets on the left side and
Additional Owners Capital on the right side represent the value of the controllers
personal residence. She has a mortgage with the bank for the full value of the
house.
vii. The $50,000 note payable resulted from a loan that was taken out at the beginning
of the year to finance the purchase of bats, balls, uniforms, lawn mowers, and
other miscellaneous supplies needed to operate the team. (Equipment is reported
as an asset for the same amount.) The loan, with interest, is due on April 15, 2015.
Even though the team had a very successful first year, Riverside is a little short of
cash at the end of 2014 and has asked the bank for the three-month extension of
the loan. The controller reasons, By the due date of April 15, 2015, the cash due
 from the new season tickets holders will be available, things will be cleared up with
the advertisers, and the loan can be easily repaid.
Required
1. Identify any errors you think the controller has made in preparing the financial
statements.
2. On the basis of your answer in part (1), prepare a revised income statement,
Statement of Retained Earnings and Balance Sheet.
3. On the basis of your revised financial statements, identify any ethical dilemma you
now face. Does the information regarding the season ticket revenue provide
reliable information to an outsider? Does the $100,000 advertising revenue on the
income statement represent the underlying economic reality of the transaction? Do
you have a responsibility to share these revisions with the other three owners?
What is your responsibility to the bank?
4. Using Exhibit 1-9 and the related text as your guide, analyze the key elements in
the situation and answer the following questions. Support your answer by
explaining your reasoning.
a) Who may benefit or be harmed?
b) How are they likely to benefit or be harmed?
c) What rights or claims may be violated?
d) What specific interests are in conflict?
e) What are your responsibilities and obligations?
f) Do you believe the information provided by the organization is relevant and
is a faithful representation?

QUESTION 5 [2.5]
Case-Busy Bee Caf [3]
The partnership that ran the Busy bee caf was dissolved under some problems on March 31, 2010 so in
reference to the dissolution it was essential to prepare a balance sheet.
While working in a restaurant in Sydney, Mr. and Mrs. Ricky Bing and Mrs. Emma Mark became acquainted
such that they decided to form a partnership. On November 1, 2009, the three partners contributed $16000 each.
They also agreed to distribute the profits (one third each) proportionally to their contributed capital. The Bings
contribution denoted practically all of their savings. Mrs. Marks payment was the proceeds of her late
husbands insurance policy.
The partnership had also signed a one year lease to the busy bee caf, situated in a nearby area on that day. The
rent on the caf was $1500 on monthly basis. There were accommodation facilities on the floor above the
restaurant so the partners were fascinated by this facility. One room was taken by Mrs. Emma Mark and the
other room by Mr. and Mrs. Bing.
The partners borrowed $21000 from a local bank and utilized this plus $35000 of partnership funds to buy out
the previous operator of the caf. $53200 was for equipment and $2800 was for food and beverages then on
hand. $1428 was paid for local operating licenses, good for one year beginning November 1, and paid $1400 for
a new cash register. The remainder of $69000 was deposited in a checking account.
Sometime after November 1, the restaurant was opened by the partners with Mr. Ricky Bing as the cook and
Mrs. Bing and Mrs. Emma Mark as waiters. Mrs. Bing was also in charge of ordering the food, beverages, and
supplies. She was also responsible for operating the cash register and for the checking account.
 The restaurant operated throughout the winter season of 2009-2010 but it did not run so well. On the morning of
March 31, 2010, Mrs. Bing discovered that Mr. Bing and Mrs. Mark had disappeared. Mrs. Mark had taken all
her belongings while Mr. Bing had left behind most of his clothing, presumably because he could not do it in
the presence of Mrs. Bing without her knowing about it. The new cash register and its contents were missing
too. No other partnership assets were missing. Mrs. Bing concluded that the partnership was dissolved. (The
court afterwards confirmed that the partnership was dissolved as of March 30.)
Mrs. Bing made the decision to continue operating the caf. She realized that an accounting would have to be
made as of March 30 and called in Ross Simpson, an acquaintance who was good at accounting.
In response to Mr. Simpsons questions, Mrs. Bing said that the cash register had contained $311 and that the
checking account balance was $1030. Ski instructors who were permitted to charge their meals had run up
accounts totaling to $870. (These accounts subsequently were paid in full) The Busy bee caf owed suppliers
amounts equal $1583. Mr. Simpson estimated that depreciation on assets amounted to $2445. Food and
beverages on hand were estimated to be worth $2430. Partners drew salaries at agreed-upon amounts, and these
payments were up to date during the period of its operation. The clothing that Mr. Bing left behind was
estimated to be worth $750. The partnership had also repaid $2100 of the bank loan.
Mr. Simpson elaborated that in order to account for the partners equity, he would prepare a balance sheet. He
would list the items that the partnership owned as of March 30, subtract the amounts that it owed to outside
parties, and the balance would be the equity of the three partners. Each partner would be entitled to one third of
this amount.
Questions
A. Prepare balance sheet as of November 2, 2009.
B. Also, prepare a balance sheet as of March 30, 2010.
C. Do you think the partners would be able to get their proportionate share of the equity determined in
Question B if the partnership was dissolved on March 30, 2010 ignoring the marriage related
difficulties? Why or why not?

QUESTION 6 [1.5]
Dynamic Inc. was organized on June 2, 2012, by a group of accountants to provide accounting and tax services
to small businesses. The following transactions occurred during the first month of business:[2]
June 2: Received contributions of $10,000 from each of the three owners of the business in exchange for
shares of stock.
June 5- Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of
$2500 with the balance due in 60 days.
June 8- Signed a two year promissory note at the bank and received cash of $20,000.
June 15- Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services
performed during the month, and the bills are payable within ten days.
June 17- Paid a $900 bill from the local newspaper for advertising for the month of June.
June 23- Received the amounts billed to clients for services performed during the first half of the month.
June 28- Received and paid gas, electric, and water bills. The total amount is $2,700.
June 29- Received the landlords bill for $2,200 for rent on the office space that Dynamic leases. The bill is
payable by the 10th of the following month.
June 30- Paid salaries and wages for June. The total amount is $ 5,670.
June 30- Billed $18,400 to clients for the second half of June.
June 30- Declared and paid dividends in the amount of $6,000.
Required:
A. Prepare journal entries on the books of Dynamic Inc. to record the transaction entered into during the
month.
B. Prepare a trial balance at June 30, 2012.
C. Prepare the following financial statements:
1. Income statement for the month ended June 30, 2012.
2. Statement of retained earnings for the month ended June 30, 2012.
3. Classified balance sheet at June 30, 2012.
4. Suppose that you have just graduated from college and have been approached to join this company as an
accountant. From your evaluation of the financial statements for the first month, would you consider
joining the company? Elaborate your answer. Limit your answer to financial considerations of the
company.

All the best!!!