Exam 1Additional Review Problems (solutions at end)Use the following information to answer the next four (4) questions.Shown below are account balances for Betty’s Bookkeeping and Tax Services as of December 31, 2012.Accounts payable $ 5,800Accounts receivable 2,200Advertising expense 4,480Buildings 27,200Common stock ?Cash 7,400Dividends 800Equipment and furniture 21,200Notes payable (due 6/1/14) 7,600Prepaid insurance $ 8,800Revenue 60,280Supplies 600Supplies expense 20,240 Unearned revenue 1,000Utilities expense 2,400Wages expense 27,880Wages payable 400The balance in the company’s Retained Earnings account was $29,480 on January 1, 2012.1. What are the company’s total assets as of December 31, 2012?a. $58,600 b. $67,400 c. $71,400 d. $19,000 e. none of the above2. What are the company’s total liabilities as of December 31, 2012?a. $7,200 b. $13,800 c. $6,200 d. $14,800 e. none of the above3. What is the company’s net income (loss) for the year ended December 31, 2012?a. $(3,520) b. $4,480 c. $5,280 d. $6,280 e. none of the above4. What is the balance of Common stock as of December 31, 2012?a. $ 4,732 b. $18,640 c. $23,040 d. $52,600 e. none of the aboveUse the following information to answer the next three (3) questions.Coldspring Company has the following financial statement information available for a three-year period.2006 2007 2008Assets, January 1 $12 $ ?? $27Liabilities, January 1 4 4 ??Stockholders’ Equity, January 1 ?? 10 ??Stock issued during the year ?? 6 0Revenues for the year 16 17 24Expenses for the year 4 10 ??Dividends for the year 14 4 65. Stockholders’ equity at January 1, 2006 isa. $6. b. $8. c. $12. d. $16. e. none of the above6. Stock issued during 2006 isa. $1. b. $4. c. $8. d. $16. e. none of the above7. Liabilities at January 1, 2008 area. $2. b. $8. c. $12. d. $20. e. none of the above8. On January 1, 2008, a company’s balance sheet showed the following:Assets $100Liabilities 40Stockholders’ equity 60During January, the company had the following transactions: (a) purchased supplies on account, $10(b) received cash from customers for services to be performed in February, $20(c) purchased a new computer costing $75 by paying $15 in cash and signing a note payable for the balance(d) paid dividends of $5The company’s January 31, 2008 Balance Sheet will showAssets Liabilities Stockholders’ equitya. $200 $130 $ 70b. $185 $130 $ 55c. $180 $130 $ 50d. $145 $ 90 $ 55e. none of the above9. Jerry’s Janitorial Services Company has just completed its first year of operations. During the year, the following events took place.- Customer payments in the amount of $1,280 were received at the time the cleaning services were performed.- Another $700 of cleaning services were performed on account for customers; payments amounting to$120 have been received from those customers.- On the last day of the year, a local company paid Jerry $60 for cleaning services to be performed in 30 days.- Employee wages totaled $500 and were paid in cash.- The cleaning supplies that were used to perform the cleaning services were paid for in cash and amounted to $520.- The company rented equipment (vacuums, carpet machines, etc.) used in cleaning; at the end of the year the company owed $20 to the equipment rental company for equipment rented and used during the year.- On the last day of the year, Jerry paid $240 in advance for rent on some office space.Using accrual basis accounting, how much net income will Jerry report for the year?a. $580 b. $700 c. $920 d. $940 e. none of the aboveSOLUTIONS1. Assets = Cash + AR + Supplies + Prepaid + Buildings + Equip and Furn =7400 + 2200 + 600 + 8800 + 27200 + 21200 = 67,4002. Liabilities = AP + NP + Wages pble + Unearned revenue = 5800 + 7600 + 400 + 1000 = 14,8003. Net income = Revenue – ( Adv exp + Supplies exp + Utility exp + Wages exp) =60,280 – ( 4480 + 20240 + 2400 + 27880) = 60,280 – 55,000 = 5,2804. First, find ending balance of REBeginning RE + Net income – Dividends = Ending RE29480 + 5280 – 800 = 33,960Balance sheet must balanceAssets = Liabilities + Stockholders’ equityAssets = Liabilities + (Stock + RE)67,400 = 14800 + Stock + 33960Stock = 18,6405. Stockholders’ equity at January 1, 2006 isJanuary 1: Assets = Liab + SE12 = 4 + ?SE = 86. REMEMBER: Balance at beginning of the year is the same as the balance at the end of the previous year.For example, Stockholders’ equity 1/1/07 = Stockholders’ equity 12/31/06Stock issued during 2006 isBeginning SE (Jan 1, ’06) + Stock issued during ’06 + NI ’06 – Div ’06 = Ending (Dec 31) SE8 + Stock issued + (16 – 4) – 14 = 10Stock issued = 47. Liabilities at January 1, 2008 areFirst find SE at Jan 1, ‘08Beginning SE + Stock issued + NI – Div = Ending SE10 + 6 +( 17-10) -4 =19Now use balance sheet equation: Jan 1, ’08 Assets = Liab + SE 27 = ? + 19 Liab = 8 8. Assets Liabilities Stockholders’ equityBeg bal 100 40 60(a) 10 10(b) 20 20(c) 75(15) 60 (d) (5) (5)End bal 185 130 559. Revenues = 1280 + 700 = 1980Expenses = 500 + 520 + 20 = 1040Net income = 1980 - 1040 = 940The $60 is for services to be performed in the future; it will be included in revenue when earned (that is, when the work is performed). The $240 paid in advance is not included in expenses until the company receives the future benefit of usingthe office space.Also, note that the cleaning supplies were all used in the business, so the total amount is included in expense. If only a portion of the supplies were used, that amount would be included as expense. Any supplies left on hand would be shown on the balance sheet as an