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Solutions to Lecture 2 – Tutorial Questions Tutorial List: 2-1, 2-2, 2-3, 2-4, 2-5, 2-6 2-1. Presented below is selected information related to Santos Company at December 31, 2011. Santos reports financial information monthly. Accounts Payable R$ 3,000 Salaries Expenses R$ 16,500 Cash 7,000 Note Payable 25,000 Advertising Expense 6,000 Rent Expense 10,500 Service Revenue 54,000 Accounts Receivable 13,500 Equipment 29,000 Dividends 7,500 (a) The total assets are R$49,500, comprised of Cash R$7,000, Accounts Receivable R$13,500, and Equipment R$29,000. Net income is R$21,000, computed as follows: Revenues Service revenue .......................................... Expenses Salaries expense .......................................... Rent expense............................................... Advertising expense .................................... Total expenses Net income (c)

(b)

R$54,000 R$16,500 10,500 6,000 33,000 R$21,000

The ending equity balance of Santos Company is R$21,500. By rewriting the accounting equation, we can compute R$ Equity as Assets minus Liabilities, as follows: Total assets [as computed in (a)] Less: Liabilities Notes payable Accounts payable Equity R$49,500 R$25,000 3,000 R$21,500

28,000

Note that it is not possible to determine the company’s equity in any other way, because the beginning balance of equity is not provided.

Lecture02-Solutions-A

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2-2. (From TQ 1-6) On August 31, the statement of financial position of Nashville Veterinary Clinic showed Cash $9,000. Accounts Receivable $1,700, Supplies $600, Office Equipment $6,000, Accounts Payable $3,600, Share Capital $13,000, and Retained Earnings $700. During September the following transactions occurred. 1. Paid $2,900 cash for accounts payable due. 2. Collected $1,300 of accounts receivable. 3. Purchased additional office equipment for $2,100, paying $800 in cash and the balance on account. 4. Earned revenue of $8,000, of which $2,500 is paid in cash and the