Fundamental Financial Accounting Concepts
Fundamental Financial Accounting Concepts
10th Edition
ISBN: 9781259918186
Author: Thomas P Edmonds, Christopher Edmonds, Frances M McNair, Philip R Olds
Publisher: McGraw-Hill Education
Question
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Chapter 11, Problem 22BP

a)

To determine

Prepare a Year 1 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, Year 1.

Company B
Income statement
For the year ended December 31, Year 1
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, Year 1.

Company B
Capital statement
For the year ended December 31, Year 1
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, year 1.

Company B
Balance sheet
As on December 31, Year 1
ParticularsAmount ($)
Assets 
Cash139,000
Total assets139,000
Liabilities and Equity
Liabilities0
Equity 
JS’s Capital139,000
Total Liabilities and Equity139,000

Table (3)

Statement of cash flows:

This statement reports all the cash transactions that 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.

Prepare statement of cash flows for year ended December 31st, Year 1 of Company B.

Company B
Cash Flow Statement
For the year ended  December 31, Year 1
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 Year 1 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, Year 1.

Partnership B
Income statement
For the year ended December 31, Year 1
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, Year 1.

Partnership B
Capital statement
For the year ended December 31, Year 1
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, year 1.

Partnership B
Balance sheet
As on December 31, Year 1
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 of cash flows:

This statement reports all the cash transactions that 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.

Prepare statement of cash flows for year ended December 31st, Year 1 of Partnership B.

Partnership B
Cash Flow Statement
For the year ended  December 31, Year 1
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 Year 1 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, Year 1.

Company B
Income statement
For the year ended December 31, Year 1
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, Year 1.

Company B
Statement of changes in stockholders’ equity
For the year ended December 31, Year 1
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, year 1.

Company B
Balance sheet
As on December 31, Year 1
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 of cash flows:

This statement reports all the cash transactions that 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.

Prepare statement of cash flows for year ended December 31st, Year 1 of Corporation C.

Company B
Cash Flow Statement
For the year ended  December 31, Year 1
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)

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Chapter 11 Solutions

Fundamental Financial Accounting Concepts

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. 19AECh. 11 - Prob. 20AECh. 11 - Prob. 21APCh. 11 - Prob. 22APCh. 11 - Prob. 23APCh. 11 - Prob. 24APCh. 11 - Prob. 25APCh. 11 - Prob. 26APCh. 11 - Prob. 27APCh. 11 - Prob. 28APCh. 11 - Prob. 29APCh. 11 - Prob. 30APCh. 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. 19BECh. 11 - Prob. 20BECh. 11 - Prob. 21BPCh. 11 - Prob. 22BPCh. 11 - Prob. 23BPCh. 11 - Prob. 24BPCh. 11 - Prob. 25BPCh. 11 - Prob. 26BPCh. 11 - Prob. 27BPCh. 11 - Prob. 28BPCh. 11 - Prob. 29BPCh. 11 - Prob. 30BPCh. 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
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