Prepare income statements, statements of changes in
Explanation of Solution
Straight-line
Under the straight-line method of depreciation, the same amount of depreciation is allocated every year over the estimated useful life of an asset. The formula to calculate the depreciation cost of the asset using the residual value is shown as below:
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.
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.
Balance sheet:
Balance is the financial statement that reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.
Statement of cash flows:
Statement of cash flows is one among the financial statement of a Company statement that
Shows aggregate data of all
Income statements, Statements of changes in stockholders’ equity, Balance sheets and cash flow statements of Company B are prepared as follows:
Company B | |||||
Financial Statements | |||||
For the Year ended December 31 | |||||
Income Statements | 2018 | 2019 | 2020 | 2021 | 2022 |
Revenue | $26,100 | $28,500 | $32,000 | $31,300 | $0 |
Depreciation Expense (W.N. 1) | ($10,000) | ($10,000) | ($10,000) | ($10,000) | $0 |
Operating Income | $16,100 | $18,500 | $22,000 | $21,300 | $0 |
Gain/(Loss) | $0 | $0 | $0 | $0 | (W.N. 2) ($1,200) |
Net Income | $16,100 | $18,500 | $22,000 | $21,300 | ($1,200) |
Statements of Changes in Stockholders’ Equity | 2018 | 2019 | 2020 | 2021 | 2022 |
Beginning Common Stock | $0 | $60,000 | $60,000 | $60,000 | $60,000 |
Add: Stock Issued | $60,000 | $0 | $0 | $0 | $0 |
Ending Common Stock | $60,000 | $60,000 | $60,000 | $60,000 | $60,000 |
Beginning | $0 | $16,100 | $34,600 | $56,600 | $77,900 |
Add: Net Income | $16,100 | $18,500 | $22,000 | $21,300 | ($1,200) |
Ending Retained Earnings | $16,100 | $34,600 | $56,600 | $77,900 | $76,700 |
Total Stockholders' Equity | $76,100 | $94,600 | $116,600 | $137,900 | $136,700 |
Balance Sheets | 2018 | 2019 | 2020 | 2021 | 2022 |
Assets: | |||||
Cash | $36,100 | $64,600 | $96,600 | $127,900 | $136,700 |
Equipment | $50,000 | $50,000 | $50,000 | $50,000 | $0 |
Less: | ($10,000) | ($20,000) | ($30,000) | ($40,000) | $0 |
Total Assets | $76,100 | $94,600 | $116,600 | $137,900 | $136,700 |
Stockholders’ Equity: | |||||
Common Stock | $60,000 | $60,000 | $60,000 | $60,000 | $60,000 |
Retained Earnings | $16,100 | $34,600 | $56,600 | $77,900 | $76,700 |
Total Stockholders’ Equity | $76,100 | $94,600 | $116,600 | $137,900 | $136,700 |
Statements of Cash Flows | 2018 | 2019 | 2020 | 2021 | 2022 |
Operating Activity: | |||||
Inflow from Customers | $26,100 | $28,500 | $32,000 | $31,300 | $0 |
Net Cash Operating activity | $26,100 | $28,500 | $32,000 | $31,300 | $0 |
Investing Activity: | |||||
Sale of Equipment | $0 | $0 | $0 | $0 | $8,800 |
Paid for Equipment | ($50,000) | $0 | $0 | $0 | $0 |
Net Cash Investing activity | ($50,000) | $0 | $0 | $0 | $8,800 |
Financing Activity: | |||||
Inflow from stock issuance | $60,000 | $0 | $0 | $0 | $0 |
Net Cash Financing activity | $60,000 | $0 | $0 | $0 | $0 |
Net Change in Cash | $36,100 | $28,500 | $32,000 | $31,300 | $8,800 |
Add: Beginning Cash Balance | $0 | $36,100 | $64,600 | $96,600 | $127,900 |
Ending Cash Balance | $36,100 | $64,600 | $96,600 | $127,900 | $136,700 |
Table (1)
Working note 1:
Calculate depreciation Expense:
Working note 2:
Calculate loss on the sale of equipment:
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Chapter 6 Solutions
Survey Of Accounting
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