Survey Of Accounting
Survey Of Accounting
4th Edition
ISBN: 9780077862374
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
bartleby

Concept explainers

bartleby

Videos

Question
Book Icon
Chapter 1, Problem 32P

a.

To determine

Write an accounting equation and record the effects of each accounting events under the appropriate headings for each year. Record the amounts of expenses, revenue, and dividends in the retained earnings column.

a.

Expert Solution
Check Mark

Explanation of Solution

Accounting event:

An accounting event is a cost-effective event that affects assets, liabilities, or stockholders’ equity of a Company.

Write an accounting equation and record the effects of each accounting events under the appropriate headings for 2014 as follows:

Survey Of Accounting, Chapter 1, Problem 32P , additional homework tip  1

Table (1)

Write an accounting equation and record the effects of each accounting events under the appropriate headings for 2015 as follows:

Survey Of Accounting, Chapter 1, Problem 32P , additional homework tip  2

Table (2)

b.

To determine

Prepare an income statement, statement of changes in stockholder’s equity, year-end balance sheet and statement of cash flows for each year.

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.

Prepare an income statement for the year December 31, 2014:

Company S
 Income Statement
 For the Period Ended December 31, 2014
 Particulars $
 Service Revenue100,000
 Expenses(60,000)
 Net Income40,000

Table (3)

Prepare an income statement for the year December 31, 2015:

Company S
 Income Statement
 For the Period Ended December 31, 2015
 Particulars $
 Service Revenue130,000
 Expenses(75,000)
 Net Income 55,000

Table (4)

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.

Prepare a statement of changes in stockholder’s equity for the year ended December 31, 2014:

Company S
Statement of Changes in Stockholders’ Equity
For the Period Ended December 31, 2014
 Particulars $ $
Beginning Common Stock0 
Add: Common Stock Issued50,000 
Ending Common Stock $50,000
Beginning Retained Earnings0 
Add: Net Income$40,000 
Ending Retained Earnings 40,000
Total Stockholders’ Equity $90,000

Table (5)

Prepare a statement of changes in stockholder’s equity for the year ended December 31, 2015:

Company S
Statement of Changes in Stockholders’ Equity
For the Period Ended December 31, 2015
 Particulars $ $
Beginning Common Stock$50,000 
Add: Common Stock Issued20,000 
Ending Common Stock $70,000
Beginning Retained Earnings40,000 
Add: Net Income55,000 
 95,000 
Less: Dividends(15,000) 
Ending Retained Earnings 80,000
Total Stockholders’ Equity $150,000

Table (6)

Balance sheet:

Balance sheet summarizes the assets, the liabilities, and the stockholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare balance sheet as on December 31, 2014:

Company S
Balance Sheet
As on December 31, 2014
 Particulars $ $
Assets:  
Cash$65,000 
Land40,000 
Total Assets $105,000
Liabilities:  
Notes Payable $15,000
Stockholders’ Equity:  
Common Stock$50,000 
Retained Earnings40,000 
Total Stockholders’ Equity 90,000
Total Liabilities and Stockholders’ Equity $105,000

Table (7)

Prepare balance sheet as on December 31, 2015:

Company S
Balance Sheet
As of December 31, 2015
 Particulars $ $
Assets:  
Cash$115,000 
Land40,000 
Total Assets $155,000
Liabilities:  
Notes Payable $5,000
Stockholders’ Equity:  
Common Stock$70,000 
Retained Earnings80,00 
Total Stockholders’ Equity 150,000
Total Liabilities and Stockholders’ Equity $155,000

Table (8)

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.

Prepare a statement of cash flows for year ended December 31, 2014:

Company S
 Statement of Cash Flows
 For the Year Ended December 31, 2014
 Particulars $ $
 Cash Flows From Operating Activities:  
 Cash Receipts from Customers100,000 
 Cash Payments for Expenses(60,000) 
 Net Cash Flow from Operating Activities  40,000
 Cash Flows From Investing Activities:  
 Cash Payment for Land(40,000) 
 Net Cash Flow from Investing Activities (40,000)
 Cash Flows From Financing Activities:  
 Cash Receipts from Borrowed Funds 15,000 
 Cash Receipts from Stock Issue  50,000 
 Net Cash Flow from Financing Activities  65,000
 Net Increase in Cash   65,000
 Add: Beginning Cash Balance 0
Ending Cash Balance   65,000

Table (9)

Prepare a statement of cash flows for year ended December 31, 2015:

Company S
 Statement of Cash Flows
 For the Year Ended December 31, 2015
 Particulars $ $
 Cash Flows From Operating Activities:  
 Cash Receipts from Customers130,000 
 Cash Payments for Expenses(75,000) 
 Net Cash Flow from Operating Activities 55,000
 Cash Flows From Investing Activities: 
Cash Flows From Financing Activities:  
Cash Receipts from Stock Issue$20,000 
Cash Payment on Debt(10,000) 
 Cash Payment for Dividends(15,000) 
 Net Cash Flow from Financing Activities (5,000)
 Net Increase in Cash 50,000
 Add: Beginning Cash Balance 65,000
Ending Cash Balance 115,000

Table (10)

c.

To determine

Compute the amount of cash in the retained earnings account at the end of 2014 and 2015.

c.

Expert Solution
Check Mark

Explanation of Solution

The retained earnings account does not have any cash balance.

d.

To determine

Examine the balance sheets for the two years and describe the changes in the value of assets from 2014 to 2015.

d.

Expert Solution
Check Mark

Explanation of Solution

Due to the increase in cash, the value of assets increased from $105,000 (at December 31, 2014) to $155,000 (at December 31, 2015). Therefore the value of asset gets increased by $50,000 from 2014 to 2015($155,000$105,000).

e.

To determine

Compute the balance in the retained earnings account immediately after events 2 in 2014 and in 2015 are recorded.

e.

Expert Solution
Check Mark

Answer to Problem 32P

  • The balance in the Retained Earnings account is zero immediately after the Event 2 during the year 2014
  • The balance in the Retained Earnings account is $40,000 immediately after the Event 2 during the year 2015.

Explanation of Solution

  • This is because for 2014, the revenue is recorded in the revenue account but not in the retained earnings account, as the expense, dividend, and revenue are closed at the end of accounting period.  The Retained Earnings accounts will have a balance of $40,000($100,00060,000), after closing the accounts at the end of 2014.
  • However, this Retained Earnings balance of $40,000 becomes the beginning balance of Retained Earnings account on January 1, 2015.  This is because the 2014 ending balance becomes the beginning balance of 2015. Thus, the balance of $40,000 in the retained earnings for 2015 will not change until the closing process is completed in December 2015.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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...
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
The ACCOUNTING EQUATION For BEGINNERS; Author: Accounting Stuff;https://www.youtube.com/watch?v=56xscQ4viWE;License: Standard Youtube License