Fundamental Financial Accounting Concepts, 9th Edition
Fundamental Financial Accounting Concepts, 9th Edition
9th Edition
ISBN: 9780078025907
Author: Thomas P Edmonds, Christopher Edmonds, Frances M McNair, Philip R Olds
Publisher: McGraw-Hill Education
Question
Book Icon
Chapter 11, Problem 19BP

a)

To determine

Prepare a 2016 income statement, capital statement, balance sheet, and statement of cash flows for a Company B owned by Person JS.

a)

Expert Solution
Check Mark

Explanation of Solution

Income statement:

It is one of the financial statements that reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare the income statement of for Company B the year ended December 31, 2016.

Company B
Income statement
For the year ended December 31, 2016
ParticularsAmount ($)
Revenues80,000
Less: Expenses(56,000)
Net income24,000

Table (1)

Statement of owner's’ equity:

This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity. Additional capital, net income from income statement is added to and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.

Prepare the capital account of Company B for the year ended December 31, 2016.

Company B
Capital statement
For the year ended December 31, 2016
ParticularsAmount ($)
Beginning Capital Balance0
Add: initial Capital  from owner120,000
Add: Net Income24,000
Less: Withdrawal by person C(5,000)
Ending Capital Balance139,000

Table (2)

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.

Prepare the balance sheet of Company B as on December 31st, 2016.

Company B
Balance sheet
As on December 31, 2016
ParticularsAmount ($)
Assets 
Cash139,000
Total assets139,000
Liabilities and Equity
Liabilities0
Equity 
JS’s Capital139,000
Total Liabilities and Equity139,000

Table (3)

Statement Cash flows:

Statement of cash flows is a statement showing the source and application of cash between two balance sheet dates. It shows how the cash is sourced and used for the company’s operating, investing, and financing activities.

Prepare statement of cash flows for year ended December 31st, 2016 of Company B.

Company B
Cash Flow Statement
For the year ended  December 31, 2016
ParticularsAmount ($)Amount ($)
Cash Flows From Operating Activities:  
Receipts from Revenues80,000 
Paid for Expenses(56,000) 
Net Cash Flow from Operating Activities 24,000
Cash Flows From Investing Activities 0
Cash Flows From Financing Activities:  
Proceeds from owners120,000 
Paid for Owner’s Withdrawals(5,000) 
Net Cash Flow from Financing Activities 115,000
Net Change in Cash 139,000
Add: Beginning Cash Balance 0
Ending Cash Balance 139,000

Table (4)

b)

To determine

Prepare a 2016 income statement, capital statement, balance sheet, and statement of cash flows for a partnership C.

b)

Expert Solution
Check Mark

Explanation of Solution

Calculate the capital contributions and determine the adjustments to the capital account.

ParticularsAmount ($)Percentage (%)
Capital contributions:  
BS’s contribution72,00060%
JS’s contribution48,00040%
Total capital contribution120,000100%
   
Adjustments to capital account  
Revenues (add to capital)80,000 
Expenses (deduct from capital)56,000 
Withdrawals:  
BS (deduct from capital)3,500 
JS (deduct from capital)1,500 

Table (5)

Income statement:

It is one of the financial statements that reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare the income statement of a partnership B for the year ended December 31, 2016.

Partnership B
Income statement
For the year ended December 31, 2016
ParticularsAmount ($)
Revenues80,000
Less: Expenses(56,000)
Net income24,000

Table (6)

Statement of owner's’ equity:

This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity. Additional capital, net income from income statement is added to and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.

Prepare the capital account of Partnership B for the year ended December 31, 2016.

Partnership B
Capital statement
For the year ended December 31, 2016
ParticularsAmount ($)
Beginning Capital Balance0
Add: initial Capital  from partners120,000
Add: Net Income24,000
Less: Withdrawal by partners(5,000)
Ending Capital Balance139,000

Table (7)

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.

Prepare the balance sheet of Partnership B as on December 31st, 2016.

Partnership B
Balance sheet
As on December 31, 2016
ParticularsAmount ($)
Assets 
Cash139,000
Total assets139,000
Liabilities and Equity
Liabilities0
Equity 
BS’s Capital (1)78,100
JS’s Capital (1)60,900
Total Liabilities and Equity139,000

Table (8)

Statement Cash flows:

Statement of cash flows is a statement showing the source and application of cash between two balance sheet dates. It shows how the cash is sourced and used for the company’s operating, investing, and financing activities.

Prepare statement of cash flows for year ended December 31st, 2016 of Partnership B.

Partnership B
Cash Flow Statement
For the year ended  December 31, 2016
ParticularsAmount ($)Amount ($)
Cash Flows From Operating Activities:  
Receipts from Revenues80,000 
Paid for Expenses(56,000) 
Net Cash Flow from Operating Activities 24,000
   
Cash Flows From Investing Activities 0
   
Cash Flows From Financing Activities:  
Proceeds from Partners120,000 
Paid for partners’ Withdrawals(5,000) 
Net Cash Flow from Financing Activities 115,000
   
Net Change in Cash 139,000
Add: Beginning Cash Balance 0
Ending Cash Balance 139,000

Table (9)

Working note:

Calculate the ending balance of capital for each partner.

ParticularsBSJSTotal
Beginning Capital Balance$0$0$0
Investments72,00048,000120,000
Add: Net Income  24,000
BS 40%9,600  
JS 60% 14,400 
Less: Withdrawals(3,500)(1,500)(5,000)
Ending Capital Balances$78,100$60,900$139,000

(1)

Table (10)

c)

To determine

Prepare a 2016 income statement, statement of changes in stockholders equity, balance sheet, and statement of cash flows for Company B.

c)

Expert Solution
Check Mark

Explanation of Solution

Income statement:

It is one of the financial statements that reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare the income statement of Company B for the year ended December 31, 2016.

Company B
Income statement
For the year ended December 31, 2016
ParticularsAmount ($)
Revenues80,000
Less: Expenses(56,000)
Net income24,000

Table (11)

Statement of owner's’ equity:

This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity. Additional capital, net income from income statement is added to and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.

Prepare the capital account of Company B for the year ended December 31, 2016.

Company B
Statement of changes in stockholders’ equity
For the year ended December 31, 2016
ParticularsAmount ($)
Beginning Capital Balance0
Add: issuance of common stock120,000
Ending common stock120,000
  
Beginning retained earnings$0
Add: Net Income24,000
Less: Dividends(5,000)
Ending retained earnings$19,000
  
Total stockholders’ equity139,000

Table (12)

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.

Prepare the balance sheet of Company B as on December 31st, 2016.

Company B
Balance sheet
As on December 31, 2016
ParticularsAmount ($)
Assets 
Cash139,000
Total assets139,000
 
Liabilities and Equity
Liabilities0
Equity 
Common stock, $10 par value, 10,000 shares issued and outstanding100,000
Paid-in capital in excess and outstanding20,000
Total paid in capital120,000
Retained earnings19,000
Total Liabilities and Equity139,000

Table (13)

Statement Cash flows:

Statement of cash flows is a statement showing the source and application of cash between two balance sheet dates. It shows how the cash is sourced and used for the company’s operating, investing, and financing activities.

Prepare statement of cash flows for year ended December 31st, 2016 of Corporation C.

Company B
Cash Flow Statement
For the year ended  December 31, 2016
ParticularsAmount ($)Amount ($)
Cash Flows From Operating Activities:  
Receipts from Revenues80,000 
Paid for Expenses(56,000) 
Net Cash Flow from Operating Activities 24,000
   
Cash Flows From Investing Activities 0
   
Cash Flows From Financing Activities:  
Proceeds from issue of stock120,000 
Paid for Dividends(5,000) 
Net Cash Flow from Financing Activities 115,000
   
Net Change in Cash 139,000
Add: Beginning Cash Balance 0
Ending Cash Balance 139,000

Table (14)

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 11 Solutions

Fundamental Financial Accounting Concepts, 9th Edition

Ch. 11 - Prob. 11QCh. 11 - Prob. 12QCh. 11 - Prob. 13QCh. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - Prob. 17QCh. 11 - Prob. 18QCh. 11 - Prob. 19QCh. 11 - Prob. 20QCh. 11 - Prob. 21QCh. 11 - Prob. 22QCh. 11 - Prob. 23QCh. 11 - Prob. 24QCh. 11 - Prob. 25QCh. 11 - Prob. 26QCh. 11 - Prob. 27QCh. 11 - Prob. 28QCh. 11 - Prob. 29QCh. 11 - Prob. 30QCh. 11 - Prob. 31QCh. 11 - Prob. 32QCh. 11 - Prob. 1AECh. 11 - Prob. 2AECh. 11 - Prob. 3AECh. 11 - Prob. 4AECh. 11 - Prob. 5AECh. 11 - Prob. 6AECh. 11 - Prob. 7AECh. 11 - Prob. 8AECh. 11 - Prob. 9AECh. 11 - Prob. 10AECh. 11 - Prob. 11AECh. 11 - Prob. 12AECh. 11 - Prob. 13AECh. 11 - Prob. 14AECh. 11 - Prob. 15AECh. 11 - Prob. 16AECh. 11 - Prob. 17AECh. 11 - Prob. 18AECh. 11 - Prob. 19APCh. 11 - Prob. 20APCh. 11 - Prob. 21APCh. 11 - Prob. 22APCh. 11 - Prob. 23APCh. 11 - Prob. 24APCh. 11 - Prob. 25APCh. 11 - Prob. 26APCh. 11 - Prob. 1BECh. 11 - Prob. 2BECh. 11 - Prob. 3BECh. 11 - Prob. 4BECh. 11 - Prob. 5BECh. 11 - Prob. 6BECh. 11 - Prob. 7BECh. 11 - Prob. 8BECh. 11 - Prob. 9BECh. 11 - Prob. 10BECh. 11 - Prob. 11BECh. 11 - Prob. 12BECh. 11 - Prob. 13BECh. 11 - Prob. 14BECh. 11 - Prob. 15BECh. 11 - Prob. 16BECh. 11 - Prob. 17BECh. 11 - Prob. 18BECh. 11 - Prob. 19BPCh. 11 - Prob. 20BPCh. 11 - Prob. 21BPCh. 11 - Prob. 22BPCh. 11 - Prob. 23BPCh. 11 - Prob. 24BPCh. 11 - Prob. 25BPCh. 11 - Prob. 26BPCh. 11 - Prob. 1ATCCh. 11 - Prob. 3ATCCh. 11 - Prob. 4ATCCh. 11 - Prob. 5ATCCh. 11 - Prob. 6ATCCh. 11 - Prob. 7ATCCh. 11 - Prob. 8ATCCh. 11 - Prob. 9ATCCh. 11 - Prob. 10ATCCh. 11 - Prob. 1CP
Knowledge Booster
Background pattern image
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