Financial Accounting Exercises: Analyzing Statements and Cash Flows

This document presents solutions to several accounting exercises. The first exercise, 2-15A, demonstrates the effect of events on the accounting equation, followed by the creation of an income statement, a balance sheet, and a statement of cash flows for Life, Inc. Exercise 2-19A analyzes the impact of transactions on the financial statements for Hart Attorney At Law, showing the effects on the balance sheet and income statement. Exercise 2-27A focuses on net income and cash flow from operating activities, analyzing the direction and amount of change for various events and adjustments. Exercise 2-29A and 2-30A involve classifying events (AS, AU, AE, NA) and categorizing cash flow activities, respectively. This assignment covers fundamental accounting principles and financial statement analysis.

EXERCISE 2-15A
a.
Life, Inc.
Effect of Events on the Accounting Equation
Assets = Stockholders’
Equity
Event Cash
Prepaid
Rent = Retained Earnings
1. Performed
Services
36000 36000
2. Prepaid Rent (18000) 18000 NA
3. Used Rent (16500) (16500)
Totals 18000 1500 = 19500
b.
Life, Inc.
Income Statement
For the Year Ended December 31, 2016
Revenue 36000
Expense 16500
Net Income 19500

Life, Inc.
Balance Sheet
As of December 31, 2016
Assets
Cash 18000
Prepaid Rent 1500
Total Assets 19500 19500
Stockholder’s Equity
Retained Earning 19500
Total liabilities and
shareholder’s equity
19500

EXERCISE 2-15A b. (cont.)
Life, Inc.
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash Flows from operating
activities
Cash receipts from revenue 36000
Cash paid for rent (18000) 18000
c.

EXERCISE 2-19A
Hart Attorney At Law
Effect of Transactions on the Financial Statements for 2016
Balance Sheet Income Statement Statement
of
Assets = Liabilities + S.
Equity
Rev  Exp. = Net Inc. Cash Flows
No. Cash + Suppli
es
=
Accts.
Payabl
e
+
Unearn.
Rev. +
Retaine
d
Earning
s
1. 36000 36000 = NA 36,000 OA
2. 54000 54000 54000 = 54,000 54,000 OA
3. 2800 2800 = NA NA
4. (2400) (2400) = NA (2,400) OA
5. (5000) (5000) = NA (5,000) FA
6. (31000) (31000) 31000 = (31,000) (31,000)
OA
7. (2600) (2600) 2600 = (2,600) NA
8. (27000) 27000 27000 = 27,000 NA
Total
s
51600 200 400 9000 42400 81000 33600 = 47,400 51,600 NC

EXERCISE 2-27A
Net Income
Cash Flow from
Operating Activities
Event/Adj.
Direction
of Change
Amount of
Change
Direction
of Change
Amount of
Change
a. Event
Adj.
Decrease 2250 Decrease 9000
b. Event
Adj.
Decrease 1700 Decrease 500
c. Event
No adj.
Increase 10000 Increase 10000
d. Event
Adj.
Increase 1600 Increase 2400
e. Event
No adj.
Decrease 5600 NA
f. Event
No adj.
Increase 3000 Increase 3000
g. Event
No adj.
NA Increase 15000
h. Event
No adj.
Increase 12000 Increase 8000

i. Event
No adj.
Decrease 4500 Decrease 4500
EXERCISE 2-29A
a. AS
b. AU
c. AU
d. NA
e. AU
f. AS
g. AS
h. AE
i. AS
j. AU

EXERCISE 2-30A
a. Paid cash on accounts payable
b. Collected cash from accounts receivable
c.Acquired cash from the issue of stock
d.Performed services for clients on account
e. Performed services for cash