In-Class Discussion Problems – Session 1

Accounting Principles for Managers

BE:1-1. Calculate net income

Ted’s Typing Service generated ₹4,000 in revenue in the month of
January. Salaries were ₹1,500 for the month, and supplies used were
₹200. Additionally, Ted’s incurred ₹50 for advertising during the month.
Required
Calculate Ted’s net income for the month of January.

BE:1-3. Calculate equity

A company reports assets of ₹10,000 and liabilities of ₹6,000.
Required
Calculate the company’s equity.

BE:1-5. Calculate retained earnings

At the beginning of the year, a company has retained earnings of
₹1,75,000. During the year, the company generates ₹1,10,000 of net
income and distributes ₹10,000 in dividends.
Required
Calculate the company’s retained earnings at year end

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 In-Class Discussion Problems – Session 1
Accounting Principles for Managers

E:1-8. principles and Assumptions

The following basic accounting principles and assumptions were
discussed in the chapter:
• Economic entity
• Going concern
• Monetary unit
• Cost principle
• Time period
_________ 1. Lester Company has a division in Germany. Before
preparing the financial statements for the company and the foreign
division, Lester translates the financial statements of its Germany
division from the euro to Indian rupee.
_________ 2. Matt enters into a partnership to start a bike shop with a
friend. Each partner makes an initial cash investment of ₹8 lakh. Matt
opens a checking account in the name of the company and transfers
₹8 lakh from his personal account into the new account.
_________ 3. Dreamland Inc. has always prepared financial statements
with a year-end of March 31. However, the company is going to sell
stock to the public for the first time and is required by the SEC to give
quarterly financial reports.
_________ 4. Platt Corp. purchases a fifty acre plot of land to build the
world’s largest factory. The company recorded the property at the
amount of cash given to acquire it.
_________ 5. Lockbox Corp. is in its ninetieth year of business. The
owner of the company is going to retire in two months and turn the
company over to his son.

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 In-Class Discussion Problems – Session 1
Accounting Principles for Managers

Required
Fill in the blank with the appropriate principle or assumption.

E:1-16. Net Income and Retained Earnings

Nova Corporation reports the following as of December 31:
Revenues ₹1,00,000
Beginning retained earnings ₹2,00,000
Expenses ₹8,00,000
Dividends ₹1,00,000

Required
Calculate net income and ending retained earnings for the year ending
December 31.