Concept explainers
Missing amount from financial statements
The financial statements at the end of Atlas Realty’s first month of operations follow:
Atlas Realty Income Statement For the Month Ended May 31,2018 | |||
Fees earned | $400,000 | ||
Expenses: Wages expense | $ A | ||
Rent expense | 48,000 | ||
Supplies expense | 17,600 | ||
Utilities expense | 14,400 | ||
Miscellaneous expense | 4,800 | ||
Total expenses | 288,000 | ||
Net income | $ B |
Atlas Realty |
||
Retained earnings, May 1,2018 | $ c | |
Net income | $ D | |
Dividends | (E) | |
Change in retained earnings | F | |
Retained earnings, May 31, 2018 | $ G |
Atlas Realty |
|||
Cash | Assets | $123,200 | |
Supplies | 12,800 | ||
Land | H | ||
Total assets | $ 1 | ||
Liabilities | |||
Accounts payable | $ 48,000 | ||
Stockholders' Equity | |||
Common stock | $ J | ||
Retained earnings | K | ||
Total stockholders' equity | L | ||
Total liabilities and |
$ M |
Atlas Realty Statement of |
||
Cash flows from operating activities: | ||
Cash received from customers | $ N | |
Cash payments for expenses and payments to creditors | (252,800) | |
Net cash flows from operating activities | $ O | |
Cash flows from investing activities: | ||
Cash payments for acquisition of land | (120,000) | |
Cash flows from financing activities: | ||
Cash received from issuing common stock | $160,000 | |
Cash dividends | (64,000) | |
Net cash flows from financing activities | P | |
Net increase (decrease) in cash and May 31, 2018, cash balance | $ Q |
Instructions
By analyzing the interrelationships among the four financial statements, determine the proper amounts for A through Q.
Financial statements: Financial statements refer to those statements, which are prepared by the Company according to particular formats in accounting to show its financial position.
Financial statements include the following statements:
Income statement: Income statement is a financial statement that shows the net income or net loss by deducting the expenses from the revenues and vice versa.
Statement of Retained Earnings: Statement of retained earnings shows, the changes in the retained earnings, and the income left in the company after payment of the dividends, for the accounting period.
Statement of cash flows: This statement reports all the cash transactions which are responsible for inflow and outflow of cash, and result of these transactions is reported as ending balance of cash at the end of reported period.
To Determine: The missing amount in the given financial statement of Company AR.
Answer to Problem 1.6BPR
The financial statement of Company AR or month ended May 31, 2018, is given below.
Company AR | ||
Income Statement | ||
For the month ended May 31 , 2018 | ||
Particulars | Amount ($) | Amount ($) |
Revenues | ||
Fees earned | $400,000 | |
Expenses | ||
Wages expense | (a) $203,200 | |
Rent expense | $48,000 | |
Supplies expense | $17,600 | |
Utilities expense | $14,400 | |
Miscellaneous expense | $4,800 | |
Total expenses | $288,000 | |
Net income | (b) $112,000 |
Table (1)
Hence the net income of Company AR for month ended May 31, 2018, is $112,000.
Company AR | ||
Statement of Retained Earnings | ||
For the month ended May 31 , 2018 | ||
Particulars | Amount ($) | Amount ($) |
Retained earnings, May 1, 2018 | (c) $0 | |
Net income for the month | (d) $112,000 | |
Deduct - Dividends | (e) $64,000 | |
Changes in Retained earnings | (f) $48,000 | |
Retained earnings May 31 , 2018 | (g) $48,000 |
Table (2)
Hence the retained earnings of Company AR for month ended May 31, 2018, are $48,000.
Company AR | ||
Balance Sheet | ||
May 31, 2018 | ||
Particulars | Amount ($) | Amount ($) |
Assets | ||
Current Assets | ||
Cash | $123,200 | |
Supplies | $12,800 | |
Land | (h) $120,000 | |
Total current assets | (i) $256,000 | |
Liabilities and Stockholders’ Equity | ||
Liabilities | ||
Accounts payable | $48,000 | |
Stockholder's equity | ||
Common Stock | (j) $160,000 | |
Retained earnings | (k) $48,000 | |
Total stockholders’ equity | (l) 208,000 | |
Total liabilities and stockholders’ equity | (m) $256,000 |
Table (3)
Hence the financial statement of Company AR shows the same asset and total liabilities and stockholder's equity balance of $256,000 for month ended May 31, 2018.
Company AR | ||
Statement of Cash Flows | ||
For the month ended May 31 , 2018 | ||
Particulars | Amount ($) | Amount ($) |
Cash flows from operating activities: | ||
Cash receipts from customers | (n) $400,000 | |
Cash payments for expenses and creditors | $252,800 | |
Net cash flow used for operating activities | (o) $147,200 | |
Cash flows from investing activities: | ||
Cash payment for purchase of land | $120,000 | |
Cash flows from financing activities: | ||
Cash receipt of owner’s investment | $160,000 | |
Cash Withdrawals | $64,000 | |
Net cash flow from financing activities | (p) $96,000 | |
Net Increase in cash, May 31,2018 cash balance | (q) $123,200 |
Table (4)
Hence the cash balance of Company AR on May 31, 2018, is $123,200.
Explanation of Solution
Working Notes:
- a) Wages expense: Wages expense during the month of May is $203,200.
Calculate the supplies expense.
- b) Net income: Net income during the month of May is $112,000.
Calculate the net income.
- c) Retained earnings, May 1, 2018: As this is the first month of operation for Company AR, there will be no opening balance for the retained earnings. (c)
- d) Net income for May: Net income provided in the income statement is transferred to the statement of owner's equity. Net income during the month of May is $112,000. (d)
- e) Dividends: Dividends of $64,000, provided in the statement of cash flow is transferred to the statement of retained earnings. (e)
- f) Change in retained earnings: Increase in retained earnings is $48,000.
Calculate the increase on owner's equity of Company AR.
- g) Retained earnings, May 31, 2018: The retained earnings on May 31, 2018 is the same as increase of retained earnings as there was no opening balance. The retained earnings on May 31, 2018 is $48,000 (g)
- h) Land: Land of $120,000, shown in the statement of cash flow is transferred to the balance sheet. (h)
- i) Total Assets: The sum of total assets is $256,000.
Calculate the total assets.
- j) Common Stock: Common Stock of $160,000, shown in the statement of cash flow is transferred to balance sheet. (j)
- k) Retained earnings: Retained earnings of $48,000, calculated in the statement of retained earnings are transferred to the balance sheet. (k)
- l) Total stockholders’ equity: Total stockholder's equity is $208,000.
Calculate the total liabilities and owner's equity.
- m) Total liabilities and stockholders’ equity: the total liabilities and stockholder's equity is $256,000.
Calculate the total liabilities and owner's equity.
- n) Cash receipts from customers: This includes all the income generated and received in the form of cash in the month of May, is $400,000 and it is transferred from income statement. (n)
- o) Net cash flow used for operating activities: The cash flow used for operating activities in the month of May, is $147,200.
Calculate the cash flow used for operating activities.
- p) Net cash flow from financing activities; the cash flow from financing activities in the month of April, is $96,000.
Calculate the net cash flow from financing activities.
- q) Net Increase in cash, May 31, 2018 cash balance is $123,200 and it is transferred from balance sheet. (q)
Want to see more full solutions like this?
Chapter 1 Solutions
Financial & Managerial Accounting
Additional Business Textbook Solutions
Principles of Operations Management: Sustainability and Supply Chain Management (10th Edition)
Horngren's Accounting (12th Edition)
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Operations Management: Processes and Supply Chains (12th Edition) (What's New in Operations Management)
Financial Accounting, Student Value Edition (5th Edition)
Intermediate Accounting (2nd Edition)
- Financial accounting questionsarrow_forwardThe standard composition of workers and their wage rates for producing certain product during a given month are as follows:• 12 skilled workers @ OMR 8 per hour each• 8 semi-skilled workers @ OMR 6 per hour each• 10 unskilled workers @ OMR 4 per hour eachDuring the month, the actual composition of workers was:• 10 skilled workers @ OMR 9 per hour each• 6 semi-skilled workers @ OMR 5 per hour each• 8 unskilled workers @ OMR 3 per hour eachThe standard output of the group was expected to be 5 units per hour. However, the workers were unable to produce any output for 8 hours due to a power failure. The group of workers was engaged for 120 hours during the month, and 580 units of output were recorded calculate LCV, LRV, LEV, LIIV, LYV and LMVarrow_forwardAnswer? ? General Accountingarrow_forward
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning