Using Financial Accounting Information
10th Edition
ISBN: 9781337276337
Author: Porter, Gary A.
Publisher: Cengage Learning,
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Chapter 3, Problem 3.7.2MCP
a.
To determine
Introduction: The users of financial statements review the financial statements of the company and perform appropriate analysis to take appropriate decisions, whenever required.
To prepare: Income statement for the month of June.
a.
Expert Solution
Explanation of Solution
Income statement
Month ending on June 30
| Particulars | Sub-total ($) | Total ($) |
| Revenue (Note 1) | 30,750 | |
| Less: Expenses | ||
| Salaries and wages expense | (5,670) | |
| Rent expense | (2,200) | |
| Gas, electric and water expense | (2,700) | |
| Advertising expense | (900) | (11,470) |
| Net income | 19,280 |
Note 1: Service revenue
| Particulars | $ |
| Revenue earned for services performed in first half of the month | 12,350 |
| Add: Revenue earned for services performed in second half of the month | 18,400 |
| Ending balance | 30,750 |
b.
To determine
Introduction: The users of financial statements review the financial statements of the company and perform appropriate analysis to take appropriate decisions, whenever required.
To prepare: Statement of
b.
Expert Solution
Explanation of Solution
Retained earnings statement
(For the month of June)
| Particulars | $ |
| Net income (WN1) | 19,280 |
| Less: Cash dividends paid | (6,000) |
| Retained earnings, ending balance | 13,280 |
WN1: Net income has been computed in part (a).
c.
To determine
Introduction: The users of financial statements review the financial statements of the company and perform appropriate analysis to take appropriate decisions, whenever required.
To prepare: Balance sheet at June 30.
c.
Expert Solution
Explanation of Solution
Balance sheet
As on June 30
| Liabilities & Equity | $ | Assets | $ |
| Equity: | Current assets | ||
| Capital stock | 30,000 | Cash (Note 1) | 44,580 |
| Retained earnings, ending balance (WN2) | 13,280 | Accounts receivable (Note 2) | 18,400 |
| Total equity (A) | 43,280 | Total current assets (a) | 62,980 |
| Liabilities | Non-current assets | ||
| Current liabilities | Computer | 12,000 | |
| Accounts payable | 9,500 | Total non-current assets (b) | 12,000 |
| Rent payable | 2,200 | ||
| Total current liabilities (a) | 11,700 | ||
| Long-term liabilities | |||
| Promissory note | 20,000 | ||
| Total long-term liabilities (b) | 20,000 | ||
| Total liabilities [(B) = (a) + (b)] | 31,700 | ||
| Total liabilities and equity [(A) + (B)] | 74,980 | Total assets [(a) + (b)] | 74,980 |
Note 1: Cash account
| Particulars | $ |
| Received from issue of shares of $10,000 to each of 3 the owners | 30,000 |
| Less: Paid as down payment for computer | (2,500) |
| Add: Received from issue of promissory note | 20,000 |
| Less: Paid for advertising expense | (900) |
| Add: Received from customers on account for first half of service revenue | 12,350 |
| Less: Paid gas, electric and water expenses | (2,700) |
| Less: Paid salaries and wages expense | (5,670) |
| Less: Paid cash dividends | (6,000) |
| Ending balance | 44,580 |
Note 2: Accounts receivable
| Particulars | $ |
| Revenue earned for services performed in first half of the month | 12,350 |
| Less: Cash received from customers on account | (12,350) |
| Revenue earned for services performed in second half of the month | 18,400 |
| Ending balance | 18,400 |
Refer to part (b) for the computation of retained earnings, ending balance.
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Chapter 3 Solutions
Using Financial Accounting Information
Ch. 3 - Prob. 3.1ECh. 3 - Prob. 3.2ECh. 3 - Prob. 3.3ECh. 3 - Prob. 3.4ECh. 3 - Prob. 3.5ECh. 3 - Prob. 3.6ECh. 3 - Prob. 3.7ECh. 3 - Prob. 3.8ECh. 3 - Prob. 3.9ECh. 3 - Prob. 3.10E
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