1. Problem 2.1
Listed below in random order are the items to be included in the balance sheet
of Mystery Lodge at December 31,2001.
Equipment
Land
Accounts payable-54800
Accounts receivable-10600
Salaries payable-33500
Interest payable-12000
Buildings
Stanley Gardner, capital-?
Cash-21400
Furnishings-58700
Snowmobiles-15400
Notes payable

2. Mystery Mountain Lodge Balance Sheet December 31, 2001
Assets
Cash 21,400
Accounts Receivable 10,600
Land 425,000
Buildings 450,000
Furnishings 58,700
Equipment 29,200
Snowmobiles 15,400
Total
Liabilities& Owners Equity
Accounts payable 54,800
Salaries payable 33,500
Interest payable 12,000
Notes payable 620,000
Total Liabilities 720,300
Stanley Gardner,
Capital 290,000
Total

3. Exercise 2.13 FOWLER COMPANY August 31,2001 Revenues:
Services provided to customers
10,000
investment by O. Fowler, owner
5,000
Loan from bank
15,000
30,000
Expenses:
Payments to long term creditors
8,000
Expenses required to provide
services to customers
7,500
purchase of land
16,000
31,500
Net loss
1,500

4. FOWLER COMPANY Income Statement For the Month Ended August 31, 2001
Service Revenues 10,000
Expenses 7,500
Net Income $2,500

5. Investment in the Company
OVERNIGHT AUTO SERVICE
Balance Sheet
November 1, 2001
Assets
Owner's Equity
Cash
$80,000
Michael McBryan Capital

6. Purchase of an Asset (Land) for Cash
OVERNIGHT AUTO SERVICE
Balance Sheet
November 3, 2001
Assets
Owner's Equity
Cash
$28,000
Michael McBryan Capital
$80,000
Land
52,000
Total
80,000

7. Purchase of an Asset (Building) and Financing Part of the Cost
Cash down payment-6000
Note payable-30000
OVERNIGHT AUTO SERVICE
Balance Sheet
November 5, 2001
Assets
Liabilities & Owner's Equity
Cash
$22,000
Liabilities:
Land
52,000
Notes Payable
$30,000
Building
36,000
Owner's equity:
Michael McBryan, Capital
80,000
Total
$110,000

8. Purchase of an Asset (Tools & Equipment) “On Account”
OVERNIGHT AUTO SERVICE
Balance Sheet
November 17, 2001
Assets
Liabilities & Owner's Equity
Cash
$22,000
Liabilities:
Land
52,000
Notes Payable
$30,000
Building
36,000
Accounts Payable
13,800
Tools and Equipment
Total Liabilities
43,800
Owner's Equity:
Michael McBryan, Capital
80,000
Total
$123,800

9. Sale of an Asset( Tools& Equipment)
OVERNIGHT AUTO SERVICE
Balance Sheet
November 20, 2001
Assets
Liabilities & Owner's Equity
Cash
$22,000
Liabilities:
Accounts Receivable
1,800
Notes Payable
$30,000
Land
52,000
Accounts Payable
13,800
Building
36,000
Total Liabilities
43,800
Tools and Equipment
12,000
Owner's Equity:
Michael McBryan, Capital
80,000
Total
$123,800

10. Collection of an Account Receivable- Received $600 as partial settlement
OVERNIGHT AUTO SERVICE
Balance Sheet
November 25, 2001
Assets
Liabilities & Owner's Equity
Cash
$22,600
Liabilities:
Accounts Receivable
1,200
Notes Payable
$30,000
Land
52,000
Accounts Payable
13,800
Building
36,000
Total Liabilities
43,800
Tools and Equipment
12,000
Owner's Equity:
Michael McBryan, Capital
80,000
Total
$123,800

11. Payment of Liability-Partial Payment of Accounts Payable($6800)
OVERNIGHT AUTO SERVICE
Balance Sheet
November 26, 2001
Assets
Liabilities & Owner's Equity
Cash
$15,800
Liabilities:
Accounts Receivable
1,200
Notes Payable
$30,000
Land
52,000
Accounts Payable
7,000
Building
36,000
Total Liabilities
37,000
Tools and Equipment
12,000
Owner's Equity:
Michael McBryan, Capital
80,000
Total
$117,000

12. Earning of Revenue in Cash-Services provided worth $2200
OVERNIGHT AUTO SERVICE
Balance Sheet
November 30, 2001
Assets
Liabilities & Owner's Equity
Cash
$18,000
Liabilities:
Accounts Receivable
1,200
Notes Payable
$30,000
Land
52,000
Accounts Payable
7,000
Building
36,000
Total Liabilities
37,000
Tools and Equipment
12,000
Owner's Equity:
Michael McBryan, Capital
82,200
Total
$119,200

13. Payment of Expenses-$1400 Assets Liabilities & Owner's Equity Cash
OVERNIGHT AUTO SERVICE
Balance Sheet
November 30, 2001
Assets
Liabilities & Owner's Equity
Cash
$16,600
Liabilities:
Accounts Receivable
1,200
Notes Payable
$30,000
Land
52,000
Accounts Payable
7,000
Building
36,000
Total Liabilities
37,000
Tools and Equipment
12,000
Owner's Equity:
Michael McBryan, Capital
80,800
Total
$117,800

14. Forms of Business Organization- Sole Proprietorship
Is a business owned by one person
It is a separate entity for accounting purposes, but it is not a separate legal entity from its owner
An owner is even responsible for debts that exceed an owners’ net investment in the proprietorship
The unlimited liability of a proprietorship is sometimes a disadvantage
Tax authorities do not separate a proprietorship from its owners
The rate of tax on a proprietorships’ income depends on the level of total income from all sources that the owner had for the year

15. Forms of Business Organization- Partnership
Is a business owned by two or more people, called partners
No special legal requirements must be met in starting a partnership
The agreement can be written or oral and usually indicates how income and losses are shared
A partnership like a proprietorship, is not legally separate from its owners
Unlimited liability for partners

16. …Cont
Two types of partnerships limit liability:
A limited partnership includes a general partner(s) with unlimited liability and a limited partner(s) with liability restricted to the amount invested.
A limited liability partnership restricts partners’ liabilities to their own acts and the acts of individuals under their control. This protects an innocent partner from the negative negligence of another partner

17. Forms of Business Organization- Corporation
A corporation is a business legally separate from its owners, meaning it is responsible for its own acts and its own debts
It can enter into contracts, it can buy, own, and sell property
It has separate legal status which means that its owners who are called shareholders, are not personally liable for corporate acts and debts
Shareholders loss is limited to their net investment in the purchased shares
A corporation is subject to double taxation