The revenues and expenses of Adventure Travel Service for the year ended April 30, 2019, follow:

$$\begin{array}{lr}\text { Fees earned } & \$ 2,180,000 \\ \text { Office expense } & 400,000 \\ \text { Miscellaneous expense } & 25,000 \\ \text { Wages expense } & 1,300,000\end{array}$$

Prepare an income statement for the year ended April 30, 2019.

On July 1, 2019, Pat Glenn established Half Moon Realty. Pat completed the following transactions during the month of July:

a. Opened a business bank account with a deposit of $\$ 25,000$ from personal funds.
b. Purchased office supplies on account, $\$ 1,850$.
c. Paid creditor on account, $\$ 1,200$.
d. Earned sales commissions, receiving cash, $\$ 41,500$.
e. Paid rent on office and equipment for the month, $\$ 3,600$.
f. Withdrew cash for personal use, $\$ 4,000$.
g. Paid automobile expenses (including rental charge) for the month, $\$3,050$, and miscellaneous expenses, $\$1,600$.
h. Paid office salaries, $\$ 5,000$.
i. Determined that the cost of supplies on hand was $\$ 950$; therefore, the cost of supplies used was $\$ 900$.

Instructions

1. Indicate the effect of each transaction and the balances after each transaction, using the following tabular headings:

$$\begin{array}{c} \begin{array}{ccc} \begin{array}{ccc} & \text{Assets}\\ \hline \\ \\ \text{Cash} & + & \text{Supplies} \end{array} & \begin{array}{c} =\\ \\ = \end{array} & \begin{array}{ccccccccccccccccccccc} \text{Liabilities} & + &&&&&&& \text{Owner’s Equity}\\ \hline && \text{Pat} && \text{Pat}\\ \text {Accounts} && \text {Glenn,} && \text {Glenn,} && \text {Sales} && \text { Salaries } && \text { Rent } && \text { Auto } && \text { Supplies } && \text { Misc. } \\ \text { Payable } & + & \text { Capital } & - & \text { Drawing } & + & \text { Commission} & - & \text {Expense} & - & \text {Expense} & - & \text {Expense} & - & \text {Expense} & - & \text {Expense } \\ \end{array} \end{array} \end{array}$$

2. Prepare an income statement for July, a statement of owner's equity for July, and a balance sheet as of July 31.

There are two common causes of business and accounting fraud:

• A failure of individual character
• A culture of greed or ethical indifference within an organization

Write a brief memo describing how these two factors could lead to accounting fraud.

The total assets and total liabilities (in millions) of Keurig Green Mountain, Inc. and Starbucks Corporation follow:

$$\begin{array}{lcc} & \text { Keurig Green } \\ & \text { Mountain } & \text { Starbucks } \\ \hline \text { Assets } & \$ 4,002 & \$ 12,446 \\ \text { Liabilities } & 1,288 & 6,628 \end{array}$$

Determine the owners' equity of each company.

Interstate Delivery Service is owned and operated by Katie Wyer. The following selected transactions were completed by Interstate Delivery Service during May:

1. Received cash from owner as additional investment, $18,000.
2. Paid advertising expense,$4,850.
3. Purchased supplies on account, $2,100.
4. Billed customers for delivery services on account,$14,700.
5. Received cash from customers on account, $8,200.

Indicate the effect of each transaction on the accounting equation elements (Assets, Liabilities, Owner’s Equity, Drawing, Revenue, and Expense). Also indicate the specific item within the accounting equation element that is affected. To illustrate, answer as follows:

(1) Asset (Cash) increases by$18,000; Owner’s Equity (Katie Wyer, Capital) increases by $18,000.

Bridgeport Delivery Service is owned and operated by Jerome Foley. The following selected transactions were completed by Bridgeport Delivery Service during February:

1. Received cash from owner as additional investment, $40,000.
2. Billed customers for delivery services on account,$13,750.
3. Paid creditors on account, $2,500.
4. Received cash from customers on account,$9,000.
5. Paid cash to owner for personal use, $1,000.

Indicate the effect of each transaction on the accounting equation elements (Assets, Liabilities, Owner’s Equity, Drawing, Revenue, and Expense). Also, indicate the specific item within the accounting equation element that is affected. To illustrate, answer as follows:

(1) Asset (Cash) increases by$40,000; Owner’s Equity (Jerome Foley, Capital) increases by $40,000

In teams, select a public company that interests you. Obtain the company's most recent annual report on Form 10-K. The Form 10-K is a company's annually required filing with the Securities and Exchange Commission (SEC). It includes the company's financial statements and accompanying notes. The Form 10-K can be obtained either (A) by referring to the investor relations section of the company's website or (B) by using the company search feature of the SEC's EDGAR database service.

Based on the information in the company's most recent annual report, answer the following questions:

1. What is the official name of the company?
2. Where are the company's principal offices located?
3. Who is the company's chief executive officer?
4. Is the company primarily a service, merchandising, or manufacturing business?
5. How does the company describe its business?
6. Which financial statements are included in the annual report?

Why are most large companies like Microsoft, PepsiCo, Caterpillar, and AutoZone organized as corporations?

Big Sky Sports sells hunting and fishing equipment and provides guided hunting and fishing trips. Big Sky Sports is owned and operated by Joe Flannery, a well-known sports enthusiast and hunter. Joe's wife, Pam, owns and operates Glacier Boutique, a women's clothing store. Joe and Pam have established a trust fund to finance their children's college education. The trust fund is maintained by Kalispell State Bank in the name of the children, Trey and Brooke.

a. For each of the following transactions, identify which of the entities listed should record the transaction in its records:

$$\begin{aligned} &\text { Entities }\\ &\begin{array}{ll} \hline \text { G } & \text { Glacier Boutique } \\ \text { K } & \text { Kalispell State Bank } \\ \text { B } & \text { Big Sky Sports } \\ \text { X } & \text { None of the above } \end{array} \end{aligned}$$

1. Pam deposited a $\$ 2,000$ personal check in the trust fund at Kalispell State Bank.
2. Pam purchased two dozen spring dresses from a Spokane designer for a special spring sale.
3. Joe paid a breeder's fee for an English Springer Spaniel to be used as a hunting guide dog.
4. Pam authorized the trust fund to purchase mutual fund shares.
5. Joe paid a local doctor for his annual physical, which was required by the workmen's compensation insurance policy carried by Big Sky Sports.
6. Received a cash advance from customers for a guided hunting trip.
7. Pam paid her dues to the YWCA.
8. Pam donated several dresses from inventory for a local charity auction for the benefit of a women's abuse shelter.
9. Joe paid for dinner and a movie to celebrate their thirtieth wedding anniversary.
10. Joe paid for an advertisement in a hunters' magazine.

b. What is a business transaction?

Fritz Evans is the owner and operator of Be-The-One, a motivational consulting business. At the end of its accounting period, December 31, 2018, Be-The-One has assets of $395,000 and liabilities of$97,000. Using the accounting equation, determine the following amounts:

a. Owner’s equity as of December 31, 2018.

b. Owner’s equity as of December 31, 2019, assuming that assets decreased by $65,000 and liabilities increased by$36,000 during 2019.

Terry Fleming is the owner and operator of Go-For-It LLC, a motivational consulting business. At the end of its accounting period, December 31, 2018, Go-For-It has assets of $675,000 and liabilities of$215,000. Using the accounting equation, determine the following amounts:

a. Owner’s equity as of December 31, 2018.

b. Owner’s equity as of December 31, 2019, assuming that assets increased by $112,300 and liabilities increased by$32,000 during 2019.

Lowe's Companies Inc., a major competitor of The Home Depot in the home improvement business, operates over 1,800 stores. Lowe's recently reported the following balance sheet data (in millions):

$$\begin{array}{lrr} & \text { Year 2 } & \text { Year 1 } \\ \hline \text { Total assets } & \$ 31,827 & \$ 32,732 \\ \text { Total liabilities } & 21,859 & 20,879 \end{array}$$

a. Determine the total stockholders' equity at the end of Years 2 and 1.

b. Determine the ratio of liabilities to stockholders' equity for Year 2 and Year 1. Round to two decimal places.

c. What conclusions regarding the risk to the creditors can you draw from the ratio of liabilities to stockholders' equity for Year 2 and Year 1?

d. Using the previously prepared balance sheet data for The Home Depot, how does the ratio of liabilities to stockholders' equity of Lowe's compare to that of The Home Depot?

The Home Depot is the world's largest home improvement retailer and one of the largest retailers in the United States based on net sales volume. The Home Depot operates over 2,200 Home Depot $^\circledR$ stores that sell a wide assortment of building materials and home improvement and lawn and garden products.

The Home Depot recently reported the following balance sheet data (in millions):

$$\begin{array}{lrr} & \text { Year 2 } & {\text { Year 1 }} \\ \hline \text { Total assets } & \$ 39,946 & \$ 40,518 \\ \text { Total stockholders' equity } & 9,322 & 12,522 \end{array}$$

a. Determine the total liabilities at the end of Years 2 and 1.

b. Determine the ratio of liabilities to stockholders' equity for Year 2 and Year 1 . Round to two decimal places.

c. What conclusions regarding the margin of protection to the creditors can you draw from the ratio of liabilities to stockholders' equity for Year 2 and Year 1?

A summary of cash flows for Ethos Consulting Group for the year ended May 31, 2019, follows:

$$\begin{array}{lr} \text{Cash receipts:}\\ \quad \text{Cash received from customers} & \$637,500 \\ \quad \text{Cash received from additional investment of owner} & 62,500 \\ \text{Cash payments:} \\ \quad \text{Cash paid for operating expenses} & 475,000 \\ \quad \text{Cash paid for land} & 90,000 \\ \quad \text{Cash paid to owner for personal use} & 17,500\\ \end{array}$$

The cash balance as of June 1, 2018, was $58,000.

Prepare a statement of cash flows for Ethos Consulting Group for the year ended May 31, 2019.