Susan Kline works for Trend Press, a fairly large book publishing firm. Her best friend and rival, Lisa, works for Silver Books, a smaller publisher. Both companies issue $100,000 in bonds on July 1. Trend's bonds were issued at a discount, while Silver's were issued at a premium. Lisa sent Susan a fax the next day. She told Susan that it was obvious who the better publisher was—the market had shown its preference! She reminded Susan again of her recent increase in salary as further proof of the superiority of Silver Books.

Question

Draft a short note for Susan to send to Lisa. Explain how such a result could occur.

Answer 1

Jay Pembroke started a business in April. Prepare a Statement of Owner's Equity using the following balances for April transactions.

Cash $12,950
Accounts Receivable 2,000
Office Supplies 4,600
Prepaid Insurance 1,200

Accounts Payable $300
Jay Pembroke, Capital 18,000
Jay Pembroke, Drawing (100)
Service Fees 3,300
Rent Expense (750)

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Jay Pembroke

Statement of Owner's Equity

For Month Ended April 30, 20xx

Cash Jay Pembroke, capital, April 1, 20xx Jay Pembroke, capital, April 30, 20xx Less withdrawals for April Net income for April
Correct 4
Correct 5

Increase in capital Investment during April Jay Pembroke, capital, April 30, 20xx Less withdrawals for April Cash
Correct 6
Correct 7

Total investment
Correct 9

Increase in capital Investment during April Jay Pembroke, capital, April 1, 20xx Jay Pembroke, capital, April 30, 20xx Net income for April
Correct 10
Correct 11

Less increase in capital Less investment during April Less Jay Pembroke, capital, April 1, 20xx Less Jay Pembroke, capital, April 30, 20xx Less withdrawals for April
Correct 12
Correct 13

Increase in capital Decrease in capital
Correct 14
Correct 15

Increase in capital Investment during April Jay Pembroke, capital, April 1, 20xx Jay Pembroke, capital, April 30, 20xx Less withdrawals for April Net income for April
Correct 16
Correct 17