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Assignment 1

Strategict management (BAHRA University)

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34 1 Accounting in Action

BRIEF EXERCISES
Use basic accounting BE1-1 Presented below is the basic accounting equation. Determine the missing amounts.
equation.
Assets 5 Liabilities 1 Owner’s Equity
(LO 3)
(a) $90,000 $50,000 ?
(b) ? $44,000 $70,000
(c) $94,000 ? $53,000

Use basic accounting BE1-2 Given the accounting equation, answer each of the following questions.
equation. (a) The liabilities of Weber Company are $120,000 and the owner’s equity is $232,000.
(LO 3) What is the amount of Weber Company’s total assets?
(b) The total assets of Weber Company are $190,000 and its owner’s equity is $91,000.
What is the amount of its total liabilities?
(c) The total assets of Weber Company are $800,000 and its liabilities are equal to one-half
of its total assets. What is the amount of Weber Company’s owner’s equity?

Use basic accounting BE1-3 At the beginning of the year, Gilles Company had total assets of $800,000 and total
equation. liabilities of $300,000. Answer the following questions.
(LO 3) (a) If total assets increased $150,000 during the year and total liabilities decreased
$60,000, what is the amount of owner’s equity at the end of the year?
(b) During the year, total liabilities increased $100,000 and owner’s equity decreased
$70,000. What is the amount of total assets at the end of the year?
(c) If total assets decreased $80,000 and owner’s equity increased $120,000 during the
year, what is the amount of total liabilities at the end of the year?

Solve expanded accounting BE1-4 Use the expanded accounting equation to answer each of the following questions.
equation.
(a) The liabilities of Kafka Company are $90,000. Owner’s capital is $150,000; drawings
(LO 3) are $40,000; revenues, $450,000; and expenses, $320,000. What is the amount of Kafka
Company’s total assets?
(b) The total assets of Rivera Company are $57,000. Owner’s capital is $25,000; drawings
are $7,000; revenues, $52,000; and expenses, $35,000. What is the amount of the com-
pany’s total liabilities?
(c) The total assets of Alcorn Co. are $600,000 and its liabilities are equal to two-thirds of
its total assets. What is the amount of Alcorn Co.’s owner’s equity?

Identify assets, liabilities, and BE1-5 Indicate whether each of the following items is an asset (A), liability (L), or part of
owner’s equity. owner’s equity (OE).
(LO 3) ________ (a) Accounts receivable ________ (d) Supplies
________ (b) Salaries and wages payable ________ (e) Owner’s capital
________ (c) Equipment ________ (f) Notes payable

Determine effect of BE1-6 Presented below are three business transactions. On a sheet of paper, list the letters
transactions on basic (a), (b), and (c) with columns for assets, liabilities, and owner’s equity. For each column,
accounting equation. indicate whether the transactions increased (1), decreased (2), or had no effect (NE) on
(LO 4) assets, liabilities, and owner’s equity.
(a) Purchased supplies on account.
(b) Received cash for performing a service.
(c) Paid expenses in cash.

Determine effect of BE1-7 Follow the same format as in BE1-6. Determine the effect on assets, liabilities, and
transactions on basic owner’s equity of the following three transactions.
accounting equation.
(a) Invested cash in the business.
(LO 4) (b) Withdrawal of cash by owner.
(c) Received cash from a customer who had previously been billed for services
performed.
Classify items affecting
owner’s equity. BE1-8 Classify each of the following items as owner’s drawings (D), revenue (R), or
(LO 3) expense (E).

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DO IT! Exercises 35

________ (a) Advertising expense ________ (e) Owner’s drawings

________ (b) Service revenue ________ (f) Rent revenue
________ (c) Insurance expense ________ (g) Utilities expense
________ (d) Salaries and wages expense

BE1-9 Presented below are three transactions. Mark each transaction as affecting owner’s Determine effect of
investment (I), owner’s drawings (D), revenue (R), expense (E), or not affecting owner’s transactions on basic
equity (NOE). owner’s equity.
________ (a) Received cash for services performed (LO 4)
________ (b) Paid cash to purchase equipment
________ (c) Paid employee salaries

BE1-10 In alphabetical order below are balance sheet items for Mendoza Company at Prepare a balance sheet.
December 31, 2017. Kathy Mendoza is the owner of Mendoza Company. Prepare a balance (LO 5)
sheet, following the format of Illustration 1-9.
Accounts payable $90,000
Accounts receivable 72,500
Cash 49,000
Owner’s capital 31,500

BE1-11 Indicate whether the following items would appear on the income statement (IS), Determine where items
balance sheet (BS), or owner’s equity statement (OE). appear on financial
statements.
________ (a) Notes payable ________ (d) Cash
________ (b) Advertising expense ________ (e) Service revenue (LO 5)
________ (c) Owner’s capital

DO IT! Exercises

DO IT! 1-1 Indicate whether each of the five statements presented below is true or false. Review basic concepts.
1. The three steps in the accounting process are identification, recording, and examination. (LO 1)
2. The accounting process includes the bookkeeping function.
3. Managerial accounting provides reports to help investors and creditors evaluate a
company.
4. The two most common types of external users are investors and creditors.
5. Internal users include human resources managers.
DO IT! 1-2 Indicate whether each of the five statements presented below is true or false. Identify building blocks of
1. Congress passed the Sarbanes-Oxley Act to ensure that investors invest only in compa- accounting.
nies that will be profitable. (LO 2)
2. The standards of conduct by which actions are judged as loyal or disloyal are ethics.
3. The primary accounting standard-setting body in the United States is the Securities
and Exchange Commission (SEC).
4. The historical cost principle dictates that companies record assets at their cost and
continue to report them at their cost over the time the assets are held.
5. The monetary unit assumption requires that companies record only transactions that
can be measured in money.
DO IT! 1-3 Classify the following items as investment by owner (I), owner’s drawings (D), Evaluate effects of
revenues (R), or expenses (E). Then indicate whether each item increases or decreases transactions on owner’s
owner’s equity. equity.

(1) Drawings. (3) Advertising expense. (LO 3)

(2) Rent revenue. (4) Owner puts personal assets into the business.

DO IT! 1-4 Transactions made by M. Alberti and Co., a law firm, for the month of March are Prepare tabular analysis.
shown below and on the next page. Prepare a tabular analysis which shows the effects of these (LO 4)
transactions on the expanded accounting equation, similar to that shown in Illustration 1-8.
1. The company performed $20,000 of services for customers, on credit.
2. The company received $20,000 in cash from customers who had been billed for services
(in transaction 1).

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36 1 Accounting in Action

3. The company received a bill for $2,300 of advertising but will not pay it until a later
date.
4. M. Alberti withdrew $3,600 cash from the business for personal use.
Determine specific amounts DO IT! 1-5 Presented below is selected information related to Kirby Company at December
on the financial statements. 31, 2017. Kirby reports financial information monthly.
(LO 5) Accounts Payable $ 3,000 Salaries and Wages Expense $16,500
Cash 6,500 Notes Payable 25,000
Advertising Expense 6,000 Rent Expense 10,500
Service Revenue 53,500 Accounts Receivable 13,500
Equipment 29,000 Owner’s Drawings 7,500
(a) Determine the total assets of Kirby Company at December 31, 2017.
(b) Determine the net income that Kirby Company reported for December 2017.
(c) Determine the owner’s equity of Kirby Company at December 31, 2017.

EXERCISES
Classify the three activities of E1-1 Genesis Company performs the following accounting tasks during the year.
accounting.
________Analyzing and interpreting information.
(LO 1)
________Classifying economic events.
________Explaining uses, meaning, and limitations of data.
________Keeping a systematic chronological diary of events.
________Measuring events in dollars and cents.
________Preparing accounting reports.
________Reporting information in a standard format.
________Selecting economic activities relevant to the company.
________Summarizing economic events.
Accounting is “an information system that identifies, records, and communicates the
economic events of an organization to interested users.”

Instructions
Categorize the accounting tasks performed by Genesis as relating to either the identifica-
tion (I), recording (R), or communication (C) aspects of accounting.

Identify users of accounting E1-2 (a) The following are users of financial statements.
information.
________Customers ________Securities and Exchange Commission
(LO 1) ________Internal Revenue Service ________Store manager
________Labor unions ________Suppliers
________Marketing manager ________Vice president of finance
________Production supervisor

Instructions
Identify the users as being either external users or internal users.
(b) The following questions could be asked by an internal user or an external user.
________Can we afford to give our employees a pay raise?
________Did the company earn a satisfactory income?
________Do we need to borrow in the near future?
________How does the company’s profitability compare to other companies?
________What does it cost us to manufacture each unit produced?
________Which product should we emphasize?
________Will the company be able to pay its short-term debts?

Instructions
Identify each of the questions as being more likely asked by an internal user or an external
user.

Discuss ethics and the E1-3 Angela Duffy, president of Duffy Company, has instructed Jana Barth, the head of
historical cost principle. the accounting department for Duffy Company, to report the company’s land in the com-
(LO 2) pany’s accounting reports at its fair value of $170,000 instead of its cost of $100,000. Duffy

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Exercises 37

says, “Showing the land at $170,000 will make our company look like a better investment
when we try to attract new investors next month.”

Instructions
Explain the ethical situation involved for Jana Barth, identifying the stakeholders and the
alternatives.

E1-4 The following situations involve accounting principles and assumptions. Use accounting concepts.
1. Tisinai Company owns buildings that are worth substantially more than they originally (LO 2)
cost. In an effort to provide more relevant information, Tisinai reports the buildings at
fair value in its accounting reports.
2. Kingston Company includes in its accounting records only transaction data that can be
expressed in terms of money.
3. Roger Holloway, owner of Roger’s Photography, records his personal living costs as
expenses of the business.

Instructions
For each of the three situations, say if the accounting method used is correct or incorrect.
If correct, identify which principle or assumption supports the method used. If incorrect,
identify which principle or assumption has been violated.

E1-5 Diehl Cleaners has the following balance sheet items. Classify accounts as assets,
liabilities, and owner’s equity.
Accounts payable Accounts receivable
Cash Notes payable (LO 3)
Equipment Salaries and wages payable
Supplies Owner’s capital

Instructions
Classify each item as an asset, liability, or owner’s equity.

E1-6 Selected transactions for Green Valley Lawn Care Company are listed below. Analyze the effect of
1. Made cash investment to start business. transactions.
2. Paid monthly rent. (LO 4)
3. Purchased equipment on account.
4. Billed customers for services performed.
5. Withdrew cash for owner’s personal use.
6. Received cash from customers billed in (4).
7. Incurred advertising expense on account.
8. Purchased additional equipment for cash.
9. Received cash from customers when service was performed.

Instructions
List the numbers of the above transactions and describe the effect of each transaction on
assets, liabilities, and owner’s equity. For example, the first answer is: (1) Increase in assets
and increase in owner’s equity.

E1-7 Falske Computer Timeshare Company entered into the following transactions during Analyze the effect of
May 2017. transactions on assets,
liabilities, and owner’s equity.
1. Purchased computers for $20,000 from Digital Equipment on account.
2. Paid $4,000 cash for May rent on storage space. (LO 4)
3. Received $17,000 cash from customers for contracts billed in April.
4. Performed computer services for Viking Construction Company for $4,000 cash.
5. Paid Tri-State Power Co. $11,000 cash for energy usage in May.
6. Falske invested an additional $29,000 in the business.
7. Paid Digital Equipment for the computers purchased in (1) above.
8. Incurred advertising expense for May of $1,200 on account.

Instructions
Indicate with the appropriate letter whether each of the transactions above results in:
(a) An increase in assets and a decrease in assets.
(b) An increase in assets and an increase in owner’s equity.
(c) An increase in assets and an increase in liabilities.

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38 1 Accounting in Action

(d) A decrease in assets and a decrease in owner’s equity.

(e) A decrease in assets and a decrease in liabilities.
(f) An increase in liabilities and a decrease in owner’s equity.
(g) An increase in owner’s equity and a decrease in liabilities.

Analyze transactions and E1-8 An analysis of the transactions made by Arthur Cooper & Co., a certified public
compute net income. accounting firm, for the month of August is shown below. The expenses were $650 for rent,
(LO 4) $4,800 for salaries and wages, and $400 for utilities.

Accounts Accounts Owner’s Owner’s

Cash 1 Receivable 1 Supplies 1 Equipment 5 Payable 1 Capital 2 Drawings 1 Revenues 2 Expenses
1.1$15,000 1$15,000
2. 22,000 1$5,000 1$3,000
3. 2750 1$750
4. 14,600 1$3,900 1$8,500
5. 21,500 21,500
6. 22,000 2$2,000
7. 2650 2$650
8. 1450 2450
9. 24,800 24,800
10. 1400 2400

Instructions
(a) Describe each transaction that occurred for the month.
(b) Determine how much owner’s equity increased for the month.
(c) Compute the amount of net income for the month.

Prepare financial statements. E1-9 An analysis of transactions for Arthur Cooper & Co. was presented in E1–8.
(LO 5) Instructions
Prepare an income statement and an owner’s equity statement for August and a balance
sheet at August 31, 2017. Assume that August is the company’s first month of business.

Determine net income E1-10 Finch Company had the following assets and liabilities on the dates indicated.
(or loss).
December 31 Total Assets Total Liabilities
(LO 5)
2016 $400,000 $250,000
2017 $460,000 $300,000
2018 $590,000 $400,000
Finch began business on January 1, 2016, with an investment of $100,000.

Instructions
From an analysis of the change in owner’s equity during the year, compute the net income
(or loss) for:
(a) 2016, assuming Finch’s drawings were $15,000 for the year.
(b) 2017, assuming Finch made an additional investment of $45,000 and had no drawings
in 2017.
(c) 2018, assuming Finch made an additional investment of $15,000 and had drawings of
$25,000 in 2018.

Analyze financial statements E1-11 Two items are omitted from each of the following summaries of balance sheet and
items. income statement data for two proprietorships for the year 2017, Greene’s Goods and
(LO 5) Solar Enterprises.
Greene’s Solar
Goods Enterprises
Beginning of year:
Total assets $110,000 $129,000
Total liabilities 85,000 (c)
Total owner’s equity (a) 80,000

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Exercises 39

End of year:
Total assets 160,000 180,000
Total liabilities 120,000 50,000
Total owner’s equity 40,000 130,000
Changes during year in owner’s equity:
Additional investment (b) 25,000
Drawings 37,000 (d)
Total revenues 220,000 100,000
Total expenses 175,000 60,000

Instructions
Determine the missing amounts.

E1-12 The following information relates to Armanda Co. for the year 2017. Prepare income statement
Owner’s capital, January 1, 2017 $48,000 Advertising expense $ 1,800 and owner’s equity statement.
Owner’s drawings during 2017 6,000 Rent expense 10,400 (LO 5)
Service revenue 63,600 Utilities expense 3,100
Salaries and wages expense 29,500

Instructions
After analyzing the data, prepare an income statement and an owner’s equity statement for
the year ending December 31, 2017.

E1-13 Abby Roland is the bookkeeper for Cheng Company. Abby has been trying to deter- Correct an incorrectly
mine the correct balance sheet for Cheng Company. Cheng’s balance sheet is shown below. prepared balance sheet.
(LO 5)

CHENG COMPANY
Balance Sheet
December 31, 2017
Assets Liabilities
Cash $15,000 Accounts payable $21,000
Supplies 8,000 Accounts receivable (6,500)
Equipment 46,000 Owner’s capital 67,500
Owner’s drawings 13,000 Total liabilities and
Total assets $82,000 owner’s equity $82,000

Instructions
Prepare a correct balance sheet.

E1-14 Loren Satina is the sole owner of Clear View Park, a public camping ground near Compute net income and
the Lake Mead National Recreation Area. Loren has compiled the following financial prepare a balance sheet.
information as of December 31, 2017. (LO 5)
Revenues during 2017—camping fees $140,000 Fair value of equipment $140,000
Revenues during 2017—general store 65,000 Notes payable 60,000
Accounts payable 11,000 Expenses during 2017 150,000
Cash on hand 23,000 Accounts receivable 17,500
Original cost of equipment 105,500

Instructions
(a) Determine Loren Satina’s net income from Clear View Park for 2017.
(b) Prepare a balance sheet for Clear View Park as of December 31, 2017.

E1-15 Presented below is financial information related to the 2017 operations of Sea Legs Prepare an income statement.
Cruise Company. (LO 5)
Maintenance and repairs expense $ 95,000
Utilities expense 13,000
Salaries and wages expense 142,000
Advertising expense 24,500
Ticket revenue 410,000

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40 1 Accounting in Action

Instructions
Prepare the 2017 income statement for Sea Legs Cruise Company.

Prepare an owner’s equity E1-16 Presented below is information related to the sole proprietorship of Alice Henning,
statement. attorney.
(LO 5) Legal service revenue—2017 $335,000
Total expenses—2017 211,000
Assets, January 1, 2017 96,000
Liabilities, January 1, 2017 62,000
Assets, December 31, 2017 168,000
Liabilities, December 31, 2017 100,000
Drawings—2017 ?

Instructions
Prepare the 2017 owner’s equity statement for Alice Henning’s legal practice.

EXERCISES: SET B AND CHALLENGE EXERCISES

Visit the book’s companion website, at www.wiley.com/college/weygandt, and choose
the Student Companion site to access Exercises: Set B and Challenge Exercises.

PROBLEMS: SET A
Analyze transactions and P1-1A On April 1, Julie Spengel established Spengel’s Travel Agency. The following trans-
compute net income. actions were completed during the month.
(LO 3, 4) 1. Invested $15,000 cash to start the agency.
2. Paid $600 cash for April office rent.
3. Purchased equipment for $3,000 cash.
4. Incurred $700 of advertising costs in the Chicago Tribune, on account.
5. Paid $900 cash for office supplies.
6. Performed services worth $10,000: $3,000 cash is received from customers, and the
balance of $7,000 is billed to customers on account.
7. Withdrew $600 cash for personal use.
8. Paid Chicago Tribune $500 of the amount due in transaction (4).
Check figures provide 9. Paid employees’ salaries $2,500.
a key number to let you 10. Received $4,000 in cash from customers who have previously been billed in transac-
know you are on the right tion (6).
track. Instructions
(a) Total assets $20,800 (a) Prepare a tabular analysis of the transactions using the following column headings:
Cash, Accounts Receivable, Supplies, Equipment, Accounts Payable, Owner’s Capital,
Owner’s Drawings, Revenues, and Expenses.
(b) Net income $6,200 (b) From an analysis of the owner’s equity columns, compute the net income or net loss
for April.

Analyze transactions and P1-2A Judi Salem opened a law office on July 1, 2017. On July 31, the balance sheet
prepare income statement, showed Cash $5,000, Accounts Receivable $1,500, Supplies $500, Equipment $6,000,
owner’s equity statement, and Accounts Payable $4,200, and Owner’s Capital $8,800. During August, the following trans-
balance sheet. actions occurred.
(LO 3, 4, 5) 1. Collected $1,200 of accounts receivable.
2. Paid $2,800 cash on accounts payable.
3. Recognized revenue of $7,500 of which $3,000 is collected in cash and the balance is
due in September.
4. Purchased additional equipment for $2,000, paying $400 in cash and the balance on
account.
5. Paid salaries $2,500, rent for August $900, and advertising expenses $400.

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Problems: Set A 41

6. Withdrew $700 in cash for personal use.

7. Received $2,000 from Standard Federal Bank—money borrowed on a note payable.
8. Incurred utility expenses for month on account $270.

Instructions
(a) Prepare a tabular analysis of the August transactions beginning with July 31 balances. (a) Total assets $16,800
The column headings should be as follows: Cash 1 Accounts Receivable 1 Supplies 1
Equipment 5 Notes Payable 1 Accounts Payable 1 Owner’s Capital 2 Owner’s Draw-
ings 1 Revenues 2 Expenses.
(b) Prepare an income statement for August, an owner’s equity statement for August, and (b) Net income $3,430
a balance sheet at August 31. Ending capital $11,530

P1-3A On June 1, Cindy Godfrey started Divine Designs Co., a company that provides Prepare income statement,
craft opportunities, by investing $12,000 cash in the business. Following are the assets owner’s equity statement, and
and liabilities of the company at June 30 and the revenues and expenses for the month of balance sheet.
June. (LO 5)
Cash $10,150 Service Revenue $6,500
Accounts Receivable 2,800 Advertising Expense 500
Supplies 2,000 Rent Expense 1,600
Equipment 10,000 Gasoline Expense 200
Notes Payable 9,000 Utilities Expense 150
Accounts Payable 1,200
Cindy made no additional investment in June but withdrew $1,300 in cash for personal
use during the month.

Instructions
(a) Prepare an income statement and owner’s equity statement for the month of June and (a) Net income $4,050
a balance sheet at June 30, 2017. Owner’s equity $14,750
(b) Prepare an income statement and owner’s equity statement for June assuming the Total assets $24,950
following data are not included above: (1) $900 of services were performed and billed (b) Owner’s equity $15,500
but not collected at June 30, and (2) $150 of gasoline expense was incurred but not
paid.

P1-4A Trixie Maye started her own consulting firm, Matrix Consulting, on May 1, 2017. Analyze transactions and
The following transactions occurred during the month of May. prepare financial statements.
May 1 Trixie invested $7,000 cash in the business. (LO 3, 4, 5)
2 Paid $900 for office rent for the month.
3 Purchased $600 of supplies on account.
5 Paid $125 to advertise in the County News.
9 Received $4,000 cash for services performed.
12 Withdrew $1,000 cash for personal use.
15 Performed $5,400 of services on account.
17 Paid $2,500 for employee salaries.
20 Paid for the supplies purchased on account on May 3.
23 Received a cash payment of $4,000 for services performed on account on
May 15.
26 Borrowed $5,000 from the bank on a note payable.
29 Purchased equipment for $4,200 on account.
30 Paid $275 for utilities.

Instructions
(a) Show the effects of the previous transactions on the accounting equation using the (a) Total assets $20,800
following format.

Assets Liabilities Owner’s Equity

Accounts Notes Accounts Owner’s Owner’s
Date Cash 1 Receivable 1 Supplies 1 Equipment 5 Payable 1 Payable 1 Capital 2 Drawings 1 Revenues 2 Expenses

(b) Prepare an income statement for the month of May. (b) Net income $5,600
(c) Prepare a balance sheet at May 31, 2017. (c) Cash $14,600

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42 1 Accounting in Action

Determine financial statement P1-5A Financial statement information about four different companies is as follows.
amounts and prepare owner’s
equity statement.
Alpha Beta Psi Omega
(LO 4, 5) Company Company Company Company
January 1, 2017
Assets $ 80,000 $ 90,000 (g) $150,000
Liabilities 41,000 (d) 80,000 (j)
Owner’s equity (a) 40,000 49,000 90,000
December 31, 2017
Assets (b) 112,000 170,000 (k)
Liabilities 60,000 72,000 (h) 100,000
Owner’s equity 50,000 (e) 82,000 151,000
Owner’s equity changes in year
Additional investment (c) 8,000 10,000 15,000
Drawings 15,000 (f) 12,000 10,000
Total revenues 350,000 410,000 (i) 500,000
Total expenses 333,000 385,000 350,000 (l)

Instructions
(a) Determine the missing amounts. (Hint: For example, to solve for (a), Assets 2 Liabilities 5
Owner’s equity 5 $39,000.)
(b) Prepare the owner’s equity statement for Alpha Company.
(c) Write a memorandum explaining the sequence for preparing financial state-
ments and the interrelationship of the owner’s equity statement to the income statement
and balance sheet.

PROBLEMS: SET B AND SET C

Visit the book’s companion website, at www.wiley.com/college/weygandt, and choose the
Student Companion site to access Problems: Set B and Set C.

CONTINUING PROBLEM The Cookie Creations problem starts in this chapter and continues through Chapter 18.
The business begins as a sole proprietorship and then evolves into a partnership and
finally a corporation. You also can find this problem at the book’s companion website.
COOKIE CREATIONS: AN ENTREPRENEURIAL JOURNEY
CC1 Natalie Koebel spent much of her childhood learning the art of cookie-making from her grand-
mother. They passed many happy hours mastering every type of cookie imaginable and later creating
new recipes that were both healthy and delicious. Now at the start of her second year in college,
Natalie is investigating various possibilities for starting her own business as part of the requirements
of the entrepreneurship program in which she is enrolled.
A long-time friend insists that Natalie has to somehow include cookies in her business plan. After
a series of brainstorming sessions, Natalie settles on the idea of operating a cookie-making school.
She will start on a part-time basis and offer her services in people’s homes. Now that she has started
© leungchopan/ thinking about it, the possibilities seem endless. During the fall, she will concentrate on holiday cook-
Shutterstock ies. She will offer individual lessons and group sessions (which will probably be more entertainment
than education for the participants). Natalie also decides to include children in her target market.
The first difficult decision is coming up with the perfect name for her business. In the end, she
settles on “Cookie Creations” and then moves on to more important issues.

Instructions
(a) What form of business organization—proprietorship, partnership, or corporation—do you recom-
mend that Natalie use for her business? Discuss the benefits and weaknesses of each form and give
the reasons for your choice.
(b) Will Natalie need accounting information? If yes, what information will she need and why? How
often will she need this information?
(c) Identify specific asset, liability, and owner’s equity accounts that Cookie Creations will likely use
to record its business transactions.
(d) Should Natalie open a separate bank account for the business? Why or why not?

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