Survey Of Accounting
Survey Of Accounting
4th Edition
ISBN: 9780077862374
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 1, Problem 19E

a.

To determine

Record the eight events in the accounting equation.

a.

Expert Solution
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Explanation of Solution

The eight events are recorded using accounting equation:

Survey Of Accounting, Chapter 1, Problem 19E

Table (1)

b.

To determine

Prepare an income statement, statement of changes in equity, year-end balance sheet, and statement of cash flows for the 2014.

b.

Expert Solution
Check Mark

Explanation of Solution

Income statement: Income statement is the financial statement of a company which shows all the revenues earned and expenses incurred by the company over a period of time.

Income statement for the 2014 is prepared as follows:

Company C
Income Statement
For the Year Ended December 31, 2014
ParticularsAmount ($)
Service Revenue60,000
Utilities Expense(12,000)
Operating Expense(22,000)
Net Income$26,000

Table (2)

Statement of changes in stockholders' equity: Statement of changes in stockholders' equity records the changes in the owners’ equity during the end of an accounting period by explaining about the increase or decrease in the capital reserves of shares.

Statement of changes in equity for the 2014 is prepared is as follows:

Company C
Statement of Changes in Stockholders’ Equity
For the Year Ended December 31, 2014
ParticularsAmount ($)Amount ($)
Beginning Common Stock           20,000 
Add: Common Stock Issued         50,000 
Ending Common Stock          70,000
Beginning Retained Earnings           5,000 
Add: Net Income           26,000 
Less: Dividends (5,000) 
Ending Retained Earnings          26,000
Total Stockholders’ Equity $96,000

Table (3)

Balance sheet: Balance Sheet is one of the financial statements that summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Balance sheet for the 2014 is prepared as follows:

Company C
Balance Sheet
As of December 31, 2014
ParticularsAmount ($)Amount ($)
Assets:  
Cash 96,000 
Land25,000 
Total Assets $121,000
Liabilities:  
Notes Payable25,000 
Total Liabilities 25,000
Stockholders’ Equity:  
Common Stock70,000 
Retained Earnings26,000 
Total Stockholders’ Equity 96,000
Total Liabilities and Stockholders’ Equity $121,000

Table (4)

Statement of cash flows: Statement of cash flows is one among the financial statement of a Company statement that shows aggregate data of all cash inflows and cash outflows that is received and paid by the Company from its ongoing business operations.

Statement of cash flows for the 2014 is prepared as follows:

Company C
Statement of Cash Flows
For the Year Ended December 31, 2014
ParticularsAmount ($)Amount ($)
Cash Flows From Operating Activities:  
Cash Receipts from Customers60,000 
Cash Payment for Utilities Expense(12,000) 
Cash Payments for Other Operating Expense(22,000) 
Net Cash Flow from Operating Activities 26,000
Cash Flows From Investing Activities:  
Cash Paid to Purchase Land(15,000) 
Net Cash Flow from Investing Activities (15,000)
Cash Flows From Financing Activities:  
Cash Receipts from Stock Issue50,000 
Cash Receipts from Loan25,000 
Cash Payments for Dividends(5,000) 
Net Cash Flow from Financing Activities 70,000
Net Increase in Cash 81,000
Add: Beginning Cash Balance 15,000
Ending Cash Balance $96,000

Table (5)

c.

To determine

Ascertain the percentage of assets provided by the retained earnings and find out the amount of cash in the retained earnings account.

c.

Expert Solution
Check Mark

Explanation of Solution

Retained earnings:

Retained earnings are the portion of earnings kept by the business for the purpose of reinvestments, payment of debts, or for future growth.

Calculate the percentage of assets provided by retained earnings:

 Percantageofassetsprovidedbyretainedearnings)=RetainedearningsTotalAssets×100=$26,000$121,000×100=21.5%

Retained earnings are used to purchase assets or to pay liabilities. Therefore, the amount of cash in the retained earnings accounts cannot be determined directly.

Conclusion

Therefore, the percentage of assets provided by retained earnings is 21.5%.

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Chapter 1 Solutions

Survey Of Accounting

Ch. 1 - Prob. 11QCh. 1 - 12. Distinguish between elements of financial...Ch. 1 - Prob. 13QCh. 1 - 14. To whom do the assets of a business belong?Ch. 1 - 15. Describe the differences between creditors and...Ch. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - Prob. 18QCh. 1 - 19. What does a double-entry bookkeeping system...Ch. 1 - 22. How does acquiring capital from owners affect...Ch. 1 - Prob. 21QCh. 1 - Prob. 22QCh. 1 - 25. What are the three primary sources of assets?Ch. 1 - 26. What is the source of retained earnings?Ch. 1 - 27. How does distributing assets (paying...Ch. 1 - 28. What are the similarities and differences...Ch. 1 - Prob. 27QCh. 1 - 30. Which of the general-purpose financial...Ch. 1 - 31. What causes a net loss?Ch. 1 - 35. What three categories of cash receipts and...Ch. 1 - Prob. 31QCh. 1 - 37. Discuss the term articulation as it relates to...Ch. 1 - 38. How do temporary accounts differ from...Ch. 1 - Prob. 34QCh. 1 - 41. Identify the three types of accounting...Ch. 1 - Prob. 36QCh. 1 - Prob. 37QCh. 1 - Prob. 1ECh. 1 - Prob. 2ECh. 1 - Prob. 3ECh. 1 - Prob. 4ECh. 1 - Prob. 5ECh. 1 - Prob. 6ECh. 1 - Prob. 7ECh. 1 - Prob. 8ECh. 1 - Prob. 9ECh. 1 - Prob. 10ECh. 1 - Prob. 11ECh. 1 - Prob. 12ECh. 1 - Prob. 13ECh. 1 - Prob. 14ECh. 1 - Prob. 15ECh. 1 - Prob. 16ECh. 1 - Prob. 17ECh. 1 - Prob. 18ECh. 1 - Prob. 19ECh. 1 - Prob. 20ECh. 1 - Prob. 21ECh. 1 - Prob. 22ECh. 1 - Prob. 23ECh. 1 - Prob. 24ECh. 1 - Prob. 25ECh. 1 - Types of transactions and the horizontal...Ch. 1 - Prob. 27ECh. 1 - Prob. 28PCh. 1 - Prob. 29PCh. 1 - Prob. 30PCh. 1 - Prob. 31PCh. 1 - Prob. 32PCh. 1 - Prob. 33PCh. 1 - Prob. 34PCh. 1 - Prob. 1ATCCh. 1 - ATC 1-5 Writing Assignment Elements of financial...
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