Common stock 50,000
Retained earnings 19,000
Total stockholders' equity 69,000
Total liabilities and stockholders' equity $78,000
Ending balances:
Cash: $58,800 − $9,000 + $27,400 − $20,200 − $4,500 = $52,500
Land: No change
Notes payable: $18,000 − $9,000 = $9,000
Common stock: No change
Retained earnings: $16,300 + $27,400 − $20,200 − $4,500 = $19,000
References
Essay Difficulty: 2 Medium Learning Objective: 01-07 Prepare an income statement, a
statement of changes in stockholders equity, and a balance sheet.
52.
Award: 10.00 points
Use the following information to prepare an income statement for Penelope Company for the period ending December 31, Year 1. All transactions were for
cash.
A. Received revenue from services provided to customers, $30,500
B. Paid $19,000 cash for land
C. Issued $16,000 of common stock
D. Paid dividends to stockholders, $3,000
E. Paid operating expenses, $25,400
Required:
Prepare the income statement at the end of Year 1.
Penelope Company
Income Statement
For the Year Ended December 31, Year 1
Revenue $ 30,500
Operating expenses (25,400)
Net income $ 5,100
Only revenue and expenses are reported on the income statement. Purchasing land, paying dividends, and issuing common stock do not affect the income
statement.
References
Essay Difficulty: 1 Easy
53.
Award: 10.00 points
The following events are for Holiday Travel Services for Year 1, the first year of operations. Assume that all transactions involve the receipt or payment of cash.
1. The business acquired $50,000 from stock issued to stockholders
2. Creditors loaned the company $27,500
3. The company provided services to its customers and received $75,400
4. The company paid expenses amounting to $63,250
5. The company purchased land for $25,000
6. The company paid a dividend of $5,500 to its stockholders
Required:
a. Show the effects of the above transactions on the accounting equation (use appropriate element and account headings). For those events that affect
retained earnings, indicate the appropriate temporary account titles in a separate column. Enter 0 for items not affected.
b. Prepare an income statement and balance sheet for and at the end of Year 1.
Event Number
Assets = Liabilities + Stockholder's Equity
Accounts Titles for RE Cash Land Notes Payable Common Stock +
Retained
Earnings
1. 50,000 0 0 50,000 0
2. 27,500 0 27,500 0 0
3. 75,400 0 0 0 75,400 Service Revenue
4. (63,250) 0 0 0 (63,250) Operating Expense
5. (25,000) 25,000 0 0 0
6. (5,500) 0 0 0 5,500 Dividends
Total 59,150 25,000 27,500 50,000 6,650
Holiday Travel Services
Income Statement
For the Year Ended December 31, Year 1
Service revenue $75,400
Operating expenses (63,250)
Net income $12,150
Holiday Travel Services
Balance Sheet
As of December 31, Year 1
Assets:
Cash $59,150
Land 25,000
Total assets $84,150
Liabilities:
Notes payable $27,500
Stockholders' equity:
Common stock 50,000
Retained earnings 6,650
Total stockholders' equity 56,650
Total liabilities and stockholders' equity $84,150
References
Essay Learning Objective: 01-04 Show
how business events affect the
accounting equation.
Difficulty: 2 Medium Learning Objective: 01-07
Prepare an income statement, a
statement of changes in
stockholders equity, and a
balance sheet.
54.
Award: 10.00 points
The following transactions apply to Wilson Fitness Center for Year 2.
1. Started the business by issuing $48,000 of common stock for cash
2. Provided services to clients and received $65,500 cash
3. Borrowed $10,500 from the bank
4. Paid $8,500 for rent of equipment
5. Purchased land for $15,000
6. Paid $46,600 of salary expense
7. Paid cash dividends of $4,000 to stockholders
Required:
a. What are the total assets of the business at the end of Year 2?
b. Prepare a statement of cash flows for Year 2.
a. $48,000 + $65,500 + $10,500 − $8,500 + $15,000 − $15,000 − $46,600 − $4,000 = $64,900
b.
Wilson Fitness Center
Statement of Cash Flows
For the Year Ended December 31, Year 2
Cash flows from operating activities
Cash receipt from revenue $ 65,500