7. The company sold the land acquired in number 5 for $44,000.
8. The company paid a dividend of $1,000 to its stockholders.
9. The company repaid $20,000 of the loan described in number 2.
Required:
a. Prepare an income statement, statement of changes in stockholders' equity, and balance sheet for Year 1.
b. Prepare a statement of cash flows for Year 1.
a.
Garber Corporation
Income Statement
For the Year Ended December 31, Year 1
Service revenue $ 50,000
Operating expenses (37,200)
Net income $ 12,800
Garber Corporation
Statement of Changes in Stockholders' Equity
For the Year Ended December 31, Year 1
Beginning common stock $ 0
Add: Common stock issued 48,000
Ending common stock 48,000
Beginning retained earnings 0
Add: Net income 12,800
Less: Dividends (1,000)
Ending retained earnings 11,800
Total stockholders' equity $ 59,800
Garber Corporation
Balance Sheet
As of December 31, Year 1
Assets:
Cash $81,800
Land 0
Total assets $81,800
Liabilities:
Notes payable $22,000
Stockholders' equity:
Common stock 48,000
Retained earnings 11,800
Total stockholders' equity 59,800
Total liabilities and stockholders' equity $81,800
b.
Garber Corporation
Statement of Cash Flows
For the Year Ended December 31, Year 1
Cash flows from operating activities
Cash receipt from revenue $ 50,000
Cash payment for expense (37,200)
Net cash flow from operating activities 12,800
Cash flows for investing activities
Cash receipt from sale of land 44,000
Cash payment for land (44,000)
Net cash flow for investing activities 0
Cash flows from financing activities
Cash receipt from loan 42,000
Cash receipt from stock issue 48,000
Cash repayment of loan (20,000)
Cash dividend paid to stockholders (1,000)
Net cash flow from financing activities 69,000
Net increase in cash 81,800
Plus: Beginning cash balance 0
Ending cash balance $ 81,800
References
Essay Learning Objective: 01-07
Prepare an income statement, a
statement of changes in
stockholders equity, and a
balance sheet.
58.
Award: 10.00 points
Difficulty: 3 Hard Learning Objective: 01-08
Prepare a statement of cash
flows.
Rosemont Company began operations on January 1, Year 1, and on that date issued stock for $60,000 cash. In addition, Rosemont borrowed $50,000 cash
from the local bank. The company provided services to its customers during Year 1 and received $35,000. It purchased land for $70,000. During the year, it
paid $10,000 cash for salaries and $9,000 cash for supplies that were used up in its operations. Stockholders were paid cash dividends of $8,000 during the
year.
Required:
a. List the transactions from the information above (for example, issued common stock for $60,000) and indicate in which section of the statement of cash
flows each transaction would be reported.
b. What would the amount be for net cash flows from operating activities?
c. What would be the end-of-year balance for the cash account?
d. What would be the amount of the total assets for the Rosemont Company at the end of Year 1?
e. What would be the end-of-year balance for the retained earnings account?
a.
Transaction Description Section of Statement of Cash Flows
1 Issued stock for $60,000 cash Financing activities
2 Borrowed $50,000 cash from bank Financing activities
3 Provided services to customers, $35,000 Operating activities
4 Purchased land for $70,000 Investing activities
5 Paid cash for salaries, $10,000 Operating activities
6 Paid cash for supplies, $9,000 Operating activities
7 Paid cash dividends, $8,000 Financing activities
b. Net cash flows from operating activities = $16,000 ($35,000 − 10,000 − 9,000)
c. Cash account balance: $48,000
d. Total Assets = $118,000 (Cash = $48,000; Land = $70,000)
e. Retained earnings balance: $8,000 ($35,000 − 10,000 − 9,000 − 8,000)
References
Essay Learning Objective: 01-07
Prepare an income statement, a
statement of changes in
stockholders equity, and a
balance sheet.
Difficulty: 3 Hard Learning Objective: 01-08
Prepare a statement of cash
flows.
59.
Award: 10.00 points
The Campbell Company began operations on January 1, Year 1 and on that date issued $60,000 of common stock for cash. In addition, the company borrowed
$40,000 from the bank. It provided services to its customers during Year 1 and received $72,000 cash. During the year, it paid $80,000 cash for land, $50,000
for salaries, and $10,000 in cash dividends to the stockholders.