PFIN 2nd Edition by Lawrence Gitman ,Michael Joehnk,Randall Billingsley

Exercise 1

Tim Roberts is preparing his balance sheet and income and expense statement for the year ending June 30, 2012. He is having difficulty classifying six items and asks for your help. Which, if any, of the following transactions are assets, liabilities, income, or expense items?
a. Tim rents a house for $925 a month.
b. On June 21, 2012, Tim bought diamond earrings for his wife and charged them using his Visa card. The earrings cost $700, but he hasn't yet received the bill.
c. Tim borrowed $2,500 from his parents last fall, but so far he has made no payments to them.
d. Tim makes monthly payments of $120 on an installment loan; about half of it is interest, and the balance is repayment of principal. He has 20 payments left, totaling $2,400.
e. Tim paid $2,900 in taxes during the year and is due a tax refund of $450, which he hasn't yet received.
f. Tim invested $1,600 in some common stock.