To Take Up

�.

•Page 38, R

evie

w E

xerc

ises

–1

A-E

, 2

-5

•Page 50, E

xerc

ises

–1

an

d 4

Pa

ge

38

, R

evie

w E

xe

rcis

es

Pa

ge

38

, R

evie

w E

xe

rcis

es

•1. A

. T

he fin

ancia

l positio

n o

f a b

usin

ess

is:

–a

. T

he

diffe

ren

ce

be

twe

en

to

tal a

sse

ts a

nd

to

tal lia

bili

tie

s

•B

. If the tota

l assets

incre

ase b

y $

10,0

00

and tota

l lia

bili

tie

s d

ecre

ase b

y $

10,0

00,

the c

apita

l w

ill:

–a

. in

cre

ase

by $

20

,00

0

•C

. T

his

fo

llow

ing

is n

ot

tru

e:

–c. A

+ L

= E

•D

. A

ba

lan

ce

sh

ee

t sh

ow

s:

–b.

The fin

ancia

l p

ictu

re o

f a b

usin

ess o

n a

cert

ain

date

.

•E

. T

he

fo

llow

ing

is n

ot

tru

e:

–e.

A tru

ck that

cost $10,0

00 a

nd for

whic

h $

6,0

00 is

ow

ed is lis

ted o

n t

he b

ala

nce s

he

et

at $4,0

00.

Pa

ge

39

, R

evie

w E

xe

rcis

e 2

, 3

, 4

Pa

ge

39

, R

evie

w E

xe

rcis

e 2

, 3

, 4

Assets

incre

ase b

y 2

6,0

00

An in

cre

ase in

assets

of

26

,000

wo

uld

incre

ase e

quity

by

26,0

00

Lia

bili

ties

?

Th

e e

xtr

a 1

6,0

00 incre

ase in e

quity

(how

much th

e b

usin

ess is w

ort

h)

Equ

ityin

cre

ase b

y 4

2,0

00

wou

ld b

e f

rom

a d

ecre

ase in

liabili

ties o

f 16

,00

0

Asse

tsin

cre

ase b

y 1

0,0

00

An

incre

ase

in a

sse

ts o

f 10

,000

wou

ld in

cre

ase e

quity

by

10,0

00

Lia

bili

tie

s

?T

he

incre

ase

of

only

$3,0

00 (

ho

w m

uch t

he

busin

ess is w

ort

h)

Eq

uity

incre

ase b

y 3

,000

wo

uld

be f

rom

a incre

ase

in lia

bili

tie

s o

f 7

,000

Asse

ts ?

An incre

ase

in lia

bili

ties o

f 1

5,0

00

wo

uld

de

cre

ase h

ow

Lia

bili

ties

incre

ase

by

15,0

00

much t

he

busin

ess is w

ort

h (

eq

uity)

by

15

,000

Eq

uity

decre

ase

by

5,0

00

It o

nly

decre

ase

d b

y 5

,000

th

oug

h,

so

th

ere

must h

ave

bee

n a

n incre

ase

in a

sse

ts o

f 10

,000

Pa

ge

40

, R

evie

w E

xe

rcis

e 5

, A

.P

ag

e 4

0,

Re

vie

w E

xe

rcis

e 5

, A

.

•‘B

ala

nce S

heet’

should

be s

econd lin

e o

f title.

•‘A

ssets

’should

be u

sed a

s a

headin

g inste

ad o

f A

/R.

•A

ccounts

Receiv

able

should

be in a

lphabetical ord

er

•C

ash s

hould

be first because it is

the m

ost liq

uid

•S

upplie

s s

hould

com

e b

efo

re e

quip

ment because it is

more

liq

uid

•T

here

should

not be d

ecim

als

used o

n c

olu

mnar

paper

•T

he s

ingle

lin

e for

tota

l assets

should

be r

ight a

bove the a

sset

num

ber

•T

ota

l assets

should

be d

irectly a

cro

ss fro

m T

ota

l Lia

bili

ties a

nd

Equity

•O

wner’s E

quity s

hould

be u

nderlin

ed

•D

olla

r sig

ns a

re n

ot necessary

. (U

nle

ss u

sed c

onsis

tently)

•E

quity s

hould

lis

t ‘C

arm

en Ing, C

apital’

•A

ccounts

Payable

Sub H

eadin

g s

hould

be u

sed.

•T

ota

l Lia

bili

tie

s s

hould

not have a

double

underlin

e•

Did

anyone c

heck that th

e n

um

bers

are

corr

ect?

Pa

ge

40

, R

evie

w E

xe

rcis

e 5

. B

.P

ag

e 4

0,

Re

vie

w E

xe

rcis

e 5

. B

.

Carm

en's

Web C

reatio

ns

Bala

nce

Sheet

Septe

mber

30, 20--

Asse

tsLia

bili

ties

Cash

3652.8

0A

/P

A/R

-

Drive

Com

pute

r676.9

8

-

Nin

a's

460.5

0 -

Wils

on's

Supply

100.9

0

-

Tse

1780.0

0 -

Zip

Softw

are

412.0

0

Supplie

s900.2

5B

ank L

oan

3500.0

0

Equip

ment

6500.3

0 T

ota

l Lia

bili

ties

4689.8

8

Ow

ner's

Equity

Carm

en Ing, C

apita

l8603.9

7 T

ota

l Ass

ets

13293.8

5 T

ota

l Lia

bili

ties

& C

apita

l13293.8

5

* Decimals are not to be used when using columnar paper

Page 5

0, E

xerc

ises 1

-4

1. A

transaction

is a

fin

ancia

l event th

at

requires c

hangin

gth

e s

tate

ment of

financia

l positio

n (

bala

nce s

heet)

.

(Let’s take u

p the r

est ora

lly..)

•4. –A

. T

he

Da

ve

yC

om

pa

ny

–B

. S

mo

ke

y V

alle

y S

ki C

lub

–C

. D

ec 5

, 2

0—

–D

. D

ece

mb

er

5,

Sh

ipp

ed

by C

PX

–E

. In

30

da

ys

–F

. P

urc

ha

se

of

Na

me

Ta

gs

–G

. N

o (

Wo

uld

sa

y ‘P

aid

’)

–H

. O

bje

ctive

–P

ap

er

reco

rd o

f D

ate

s /

Am

ou

nts

/ T

erm

s /

Transactions…

Monopoly

��

.�

Begin

nin

g B

ala

nce S

heet

Endin

g B

ala

nce S

heet

These w

ere

diffe

rent

because

of

the v

arious transactions

that

had o

ccurr

ed�

Tra

nsactions�

•lik

e ‘passin

g g

o’

•buyin

g a

pro

pert

y

•payin

g taxes

•build

ing h

ouses

•A

nyth

ing that changed y

our

financia

l positio

n! (

Changed the w

ay y

our

bala

nce

sheet w

ould

have looked.)

Pla

yin

g m

onopoly

�

Exa

mple

:

When y

ou p

assed g

o,

you r

eceiv

ed $

200.

This

incre

ased y

our

Cash a

mo

unt

by

$200.

What

els

e,

on y

our

bala

nce s

heet,

did

it

cha

nge?

•P

urc

hased a

railr

oad for

$200.

•T

ransaction!

In g

en

era

l, h

ow

do t

ransa

ctions

aff

ect

the b

ala

nce s

heet?

•If w

e p

ay $

25,0

00 c

ash for

a n

ew

deliv

ery

tr

uck?

–C

ash

de

cre

ase

s b

y $

25

,00

0

–T

ruck (

Eq

uip

me

nt)

in

cre

ase

s b

y $

25

,00

0

•If w

e b

uy $

5,0

00 w

ort

h o

f supplie

s o

n

cre

dit fro

m S

upply

Co. ?

–S

up

plie

s in

cre

ase

s b

y $

5,0

00

–A

cco

un

ts P

aya

ble

(S

up

ply

Co

.) in

cra

se

sb

y

$5

,00

0

•Its n

ot only

Assets

and L

iabili

ties that are

affecte

d�

��

Changes to E

quity (

Capital)

•W

hat if w

e m

ake a

sale

?–

Ou

r b

usin

ess is w

ort

h m

ore

! (o

r ‘p

ass g

o’)

•W

hat if w

e h

ave e

xpenses, or

what if w

e

take m

oney o

ut of th

e c

om

pany?

–O

ur

bu

sin

ess w

ill b

e w

ort

h le

ss!

These tra

nsactions a

ffect th

e E

quity

(Capital) a

ccount! (b

ecause they c

hange

how

much the b

usin

ess is

actu

ally

wort

h.)

•A

s b

usin

ess tra

nsactions o

ccur,

there

are

changes in the v

alu

e o

f assets

, lia

bili

ties,

and c

apita

l.

•We could not show all of the

calculations on the balance sheet –it

would get too cluttered and m

essy

obviously.

•F

or

now

, w

e w

ill u

se a

n e

quation a

naly

sis

sheet.

Equation A

naly

sis

Sheet

for

‘Metr

opolit

an

Move

rs’

Cash

Equip

ment

Tru

ck

A/P

Loan P

ay.

J. H

ofn

er,

Capita

lB

.Cava

K. Lin

coln

Beginning

Balances

13,5

00

1,3

00

2,5

00

11,5

00

24,5

00

1,7

50

18,3

70

33,1

80

A/R

*This

is t

he s

am

e info

rmatio

n a

vaila

ble

to u

s o

n a

bala

nce s

heet,

but

in a

form

that

iseasie

r to

work

with.

Le

t’s g

o th

rou

gh

th

e f

ollo

win

g t

ran

sa

ctio

ns

tog

eth

er,

an

d s

ee

ho

w t

he

y a

ffe

ct th

e d

iffe

ren

t b

ala

nce

sh

ee

t a

cco

un

ts!

•T

ransaction 1

. M

etr

opolit

an M

overs

pay

$1,2

00 c

ash to M

erc

ury

Fin

ance.

Cash

Equip

ment

Tru

ck

A/P

Loan P

ay.

J. H

ofn

er,

Capital

B.C

ava

K. Lin

coln

Merc

. F

in.

Beginning

Balances

13,5

00

1,3

00

2,5

00

11,5

00

24,5

00

1,7

50

18,3

70

33,1

80

-1,200

-1,200

A/R

•T

ransaction 1

. M

etr

opolit

an M

overs

pay

$1,2

00 c

ash to M

erc

ury

Fin

ance.

Cash

Equip

ment

Tru

ck

A/P

Loan P

ay.

J. H

ofn

er,

Capital

B.C

ava

K. Lin

coln

Merc

. F

in.

Beginning

Balances

13,5

00

1,3

00

2,5

00

11,5

00

24,5

00

1,7

50

18,3

70

33,1

80

-1,200

-1,200

A/R

•E

ach o

f th

ese c

ells

are

calc

ula

ted b

y

addin

g u

p the tw

o c

ells

above.

Cash

Equip

ment

Tru

ck

A/P

Loan P

ay.

J. H

ofn

er,

Capital

B.C

ava

K. Lin

coln

Merc

. F

in.

Beginning

Balances

13,5

00

1,3

00

2,5

00

11,5

00

24,5

00

1,7

50

18,3

70

33,1

80

-1,200

-1,200

12,3

00

1,3

00

2,5

00

11,5

00

24,5

00

1,7

50

17,1

70

33,1

80

A/R

•�

befo

re w

e g

o a

ny furt

her�

•dow

nlo

ad the e

xcel file

‘M

etr

oT

ransactionS

heet’

from

the c

lass

website, and o

pen it in

Skydrive.

We

’ll g

o th

rou

gh

th

e r

est

of th

e t

ran

sa

ctio

ns

tog

eth

er,

an

d s

ee

ho

w t

he

y a

ffe

ct th

e d

iffe

ren

t b

ala

nce

sh

ee

t a

cco

un

ts!

•2

. K

. L

inco

ln,

wh

o o

we

s M

etr

op

olit

an

Mo

ve

rs

$2

,50

0,

pa

ys $

1,1

00

in

pa

rtia

l p

aym

en

t o

f th

e

de

bt.

•3

. E

qu

ipm

en

t co

stin

g $

1,9

50

is p

urc

ha

se

d f

or

ca

sh

.

•4

. A

ne

w p

ick-u

p t

ruck is p

urc

ha

se

d a

t a

co

st

of

$1

8,0

00

. M

etr

op

olit

an

mo

ve

rs p

ays $

10

,00

0

ca

sh

an

d a

rra

ng

es a

lo

an

fro

m M

erc

ury

Fin

an

ce

to

co

ve

r th

e b

ala

nce

of

the

pu

rch

ase

pri

ce

.

•5. M

etr

opolit

an M

overs

com

ple

tes a

sto

rage s

erv

ice for

B. C

ava a

t a p

rice o

f $1,5

00. A

bill

is s

ent to

Cava to in

dic

ate

th

e a

dditio

nal am

ount C

ava o

wes.

–(h

int:

th

e c

om

pa

ny is w

ort

h m

ore

no

w.

Wh

ich

a

cco

un

t w

ill t

ha

t a

ffe

ct?

)

•6. J. H

ofn

er,

the o

wner,

withdra

ws $

500

for

pers

onal use.

–(h

int:

th

e c

om

pa

ny is n

ow

wo

rth

le

ss)

•7. O

ne o

f th

e tru

cks r

equires e

ngin

e

repairs o

f $75. It is

paid

for

in c

ash.

–(h

int:

th

e tru

ck is n

ot

wo

rth

$7

5 m

ore

. W

e

ha

ve

ha

d t

o p

ay tha

t $

75

, an

d n

ow

ha

ve

$7

5

less in

our

bu

sin

ess.)

•D

o w

e s

till

bala

nce?

•D

o A

ssets

–Lia

bili

ties =

Ow

ner’s E

quity?

•(C

heck!)

Homework

•E

xerc

ise 1

on p

age 5

9

In a

n e

xcel file

calle

d

‘KostiukT

ransactionS

heet’, cre

ate

and

com

ple

te a

tra

nsaction a

naly

sis

sheet w

ith

the tra

nsactions p

rovid

ed.

Do y

our

Asse

ts –

Lia

bili

tie

s =

Ow

ne

r’s E

qu

ity?