FUND OF FIN ACCT W/CONNECT (LL)>CUSTOM
5th Edition
ISBN: 9781259684654
Author: PHILLIPS
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 1, Problem 1.10E
Analyzing and Interpreting an Income Statement
Three individuals organized Pest Away Corporation on January 1 to provide insect extermination services. The company paid dividends of $10,000 during the year. At the end of the first year of operations, the following income statement was prepared:
PEST AWAY CORPORATION Income Statement For the Year Ended December 31 |
||||
Revenues | ||||
Service Revenue | $192,000 | |||
Sales Revenue | 24,000 | |||
Total Revenues | 216,000 | |||
Expenses | ||||
Supplies Expense | 76,000 | |||
Salaries and Wages Expense | 33,000 | |||
Advertising Expense | 22,000 | |||
Office Expenses | 46,000 | |||
Total Expenses | 177,000 | |||
Net Income | $ 39,000 | |||
Required:
- 1. Did the company generate more revenue from selling goods or providing services to customers?
- 2. If salaries and wages were to double, how much net income would the company report?
- 3. If the company paid $20,000 for advertising during the current year, what amount is owed at the end of the year? In what account would the amount still owing be reported?
- 4. Would the $10,000 of dividends be reported on the balance sheet or statement of
retained earnings ?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Salem’s Accessory Shop started the year with total assets of $210,000 and total liabilities of $120,000. During the year the business recorded $330,000 in revenues, $165,000 in expenses, and dividends of $60,000. The net income reported by Salem’s Accessory Shop for the year was
$120,000.
$150,000.
$195,000.
$165,000.
Required information
Skip to question
[The following information applies to the questions displayed below.]
Wang Company began operations on January 1, year 1, by issuing common stock for $70,000 cash. During year 1, Wang received $88,000 cash from revenue and incurred costs that required $65,000 of cash payments.
Required
Prepare a GAAP-based income statement and balance sheet for Wang Company for year 1, for the below scenario:
Wang is a manufacturing company. The $65,000 was paid to purchase the following items:
(1) Paid $10,000 cash to purchase materials that were used to make products during the year.
(2) Paid $20,000 cash for wages of factory workers who made products during the year.
(3) Paid $5,000 cash for salaries of sales and administrative employees.
(4) Paid $30,000 cash to purchase manufacturing equipment. The equipment was used solely to make products. It had a three-year life and a $6,000 salvage value. The company uses straight-line depreciation.…
Emily’s Greenhouse Corporation is a local greenhouse organized 10 years ago as a corporation. The bookkeeper prepared the following statement at year-end (assume that all amounts are correct, but note the incorrect format):
EMILY’S GREENHOUSE CORPORATION
Profit and Loss
December 31
Debit
Credit
Net Sales
$
522,200
Cost of Goods Sold
$
323,000
Salaries and Wages Expense
69,000
Office Expenses
16,000
Travel Expenses
4,000
Income Tax Expense
33,060
Net Profit
77,140
Totals
$
522,200
$
522,200
Prepare a properly formatted multistep income statement that would be used for external reporting purposes.
Chapter 1 Solutions
FUND OF FIN ACCT W/CONNECT (LL)>CUSTOM
Ch. 1 - Define accounting.Ch. 1 - Prob. 2QCh. 1 - Briefly distinguish financial accounting from...Ch. 1 - The accounting process generates financial reports...Ch. 1 - Explain what the separate entity assumption means...Ch. 1 - List the three main types of business activities...Ch. 1 - What information should be included in the heading...Ch. 1 - What are the purposes of (a) the balance sheet,...Ch. 1 - Prob. 9QCh. 1 - Briefly explain the difference between net income...
Ch. 1 - Describe the basic accounting equation that...Ch. 1 - Describe the equation that provides the structure...Ch. 1 - Describe the equation that provides the structure...Ch. 1 - Prob. 14QCh. 1 - Prob. 15QCh. 1 - Prob. 16QCh. 1 - Briefly define what an ethical dilemma is and...Ch. 1 - Prob. 18QCh. 1 - Prob. 1MCCh. 1 - Which of the following is true regarding the...Ch. 1 - Which of the following is false regarding the...Ch. 1 - Which of the following regarding retained earnings...Ch. 1 - Prob. 5MCCh. 1 - Which of the following statements regarding the...Ch. 1 - Prob. 7MCCh. 1 - Which of the following is true? a. FASB creates...Ch. 1 - Which of the following would not be a goal of...Ch. 1 - Prob. 10MCCh. 1 - Prob. 1.1MECh. 1 - Prob. 1.2MECh. 1 - Matching Definitions with Terms Match each...Ch. 1 - Matching Financial Statement Items to Balance...Ch. 1 - Matching Financial Statement Items to Balance...Ch. 1 - Matching Financial Statement Items to Balance...Ch. 1 - Matching Financial Statement Items to Balance...Ch. 1 - Matching Financial Statement Items to the Basic...Ch. 1 - Matching Financial Statement Items to the Four...Ch. 1 - Reporting Amounts on the Statement of Cash Flows...Ch. 1 - Prob. 1.11MECh. 1 - Prob. 1.12MECh. 1 - Prob. 1.13MECh. 1 - Prob. 1.14MECh. 1 - Relationships among Financial Statements Items...Ch. 1 - Prob. 1.16MECh. 1 - Reporting Amounts on the Four Basic Financial...Ch. 1 - Reporting Amounts on the Four Basic Financial...Ch. 1 - Preparing a Balance Sheet DSW, Inc. is a designer...Ch. 1 - Completing a Balance Sheet and Inferring Net...Ch. 1 - Prob. 1.5ECh. 1 - Prob. 1.6ECh. 1 - Preparing an Income Statement Home Realty,...Ch. 1 - Prob. 1.8ECh. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Analyzing and Interpreting an Income Statement...Ch. 1 - Prob. 1.11ECh. 1 - Matching Cash Flow Statement Items to Business...Ch. 1 - Preparing an Income Statement. Statement of...Ch. 1 - Prob. 1.2CPCh. 1 - Prob. 1.3CPCh. 1 - Prob. 1.4CPCh. 1 - Preparing an Income Statement, Statement of...Ch. 1 - Prob. 1.2PACh. 1 - Prob. 1.3PACh. 1 - Prob. 1.4PACh. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Preparing an Income Statement and Balance Sheet...Ch. 1 - Prob. 1.3PBCh. 1 - Prob. 1.4PBCh. 1 - Prob. 1.1SDCCh. 1 - Prob. 1.2SDCCh. 1 - Prob. 1.5SDCCh. 1 - Prob. 1.6SDCCh. 1 - Financial Statements for a Business Plan Nicole...
Knowledge Booster
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.Similar questions
- Journal Entries Overnight Delivery Inc. is incorporated on February 1 and enters into the following transactions during its first month of operations: February 15: Received $8,000 cash from customer accounts. February 26: Provided $16,800 of services on account during the month. February 27: Received a $3,400 bill from the local service station for gas and oil used during February. February 28: Paid $400 for wages earned by employees for the month. February 28: Paid $3,230 for February advertising. February 28: Declared and paid $2,000 cash dividends to stockholders. Required Prepare journal entries on the books of Overnight to record the transactions entered into during February. Explain why you agree or disagree with the following: The transactions on February 28 all represent expenses for the month of February because cash was paid. The transaction on February 27 does not represent an expense in February because cash has not yet been paid.arrow_forwardJournal Entries Castle Consulting Agency began business in February. The transactions entered into by Castle during its first month of operations are as follows: Acquired articles of incorporation from the state and issued 10,000 shares of capital stock in exchange for $150,000 in cash. Paid monthly rent of $400. Signed a five-year promissory note for $100,000 at the bank. Purchased software to be used on future jobs. The software costs $950 and is expected to be used on five to eight jobs over the next two years. Billed customers $12,500 for work performed during the month. Paid office personnel $3,000 for the month of February. Received a utility bill of $100. The total amount is due in 30 days. Required Prepare in journal form, the entry to record each transaction.arrow_forwardBrief Exercise 1-26 Income Statement An analysis of the transactions of Rutherford Company for the year ended December 31, yields the following information: sales revenue, $65,000; insurance expense, $4,300; interest income, $3,900; cost of goods sold, $28,800; and loss on disposal of property, plant, and equipment, $1,200. Required: Prepare a single income statement.arrow_forward
- Journal Entries, Trial Balance, and Financial Statements Neveranerror Inc. was organized on June 2 by a group of accountants to provide accounting and tax services to small businesses. The following transactions occurred during the first month of business: June 2: Received contributions of $10,000 from each of the three owners of the business in exchange for shares of stock. June 5: Purchased a computer system for $12,000. The agreement with the vendor requires a down payment of $2,500 with the balance due in 60 days. June 8: Signed a two-year promissory note at the bank and received cash of $20,000. June 15: Billed $12,350 to clients for the first half of June. Clients are billed twice a month for services performed during the month, and the bills are payable within ten days. June 17: Paid a $900 bill from the local newspaper for advertising for the month of June. June 23: Received the amounts billed to clients for services performed during the first half of the month. June 28: Received and paid gas, electric, and water bills. The total amount is $2,700. June 29: Received the landlords bill for $2,200 for rent on the office space that Neveranerror leases. The bill is payable by the 10th of the following month. June 30: Paid salaries and wages for June. The total amount is $5,670. June 30: Billed $18,400 to clients for the second half of June. June 30: Declared and paid dividends in the amount of $6,000. Required Prepare journal entries on the books of Neveranerror Inc. to record the transactions entered into during the month. Ignore depreciation expense and interest expense. Prepare a trial balance at June 30. Prepare the following financial statements: Income statement for the month of June Statement of retained earnings for the month of June Classified balance sheet at June 30 Assume that you have just graduated from college and have been approached to join this company as an accountant. From your reading of the financial statements for the first month, would you consider joining the company? Explain your answer. Limit your answer to financial considerations only.arrow_forwardComparing Two Companies in the Same Industry: Chipotle and Panera Bread Refer to the financial information for Chipotle and Panera Bread reproduced at the back of the book and answer the following questions. What was the total revenue for each company for the most recent year? By what percentage did each companys revenue increase or decrease from its total amount in the prior year? What was each companys net income for the most recent year? By what percentage did each companys net income increase or decrease from its net income for the prior year? What was the total asset balance for each company at the end of its most recent year? Among its assets, what was the largest asset each company reported on its year-end balance sheet? Did either company pay its stockholders any dividends during the most recent year? Explain how you can tell.arrow_forwardJournal Entries and a Balance Sheet Krittersbegone Inc. was organized on July 1 by a group of technicians to provide termite inspections and treatment to homeowners and small businesses. The following transactions occurred during the first month of business: July 2: Received contributions of $3,000 from each of the six owners in exchange for shares of stock. July 3: Paid $1,000 rent for the month of July. July 5: Purchased flashlights, tools, spray equipment, and ladders for $18,000, with a down payment of $5,000 and the balance due in 30 days. July 17: Paid a $200 bill for the distribution of door-to-door advertising. July 28: Paid August rent and July utilities to the landlord in the amounts of $1,000 and $450, respectively. July 30: Received $8,000 in cash from homeowners for services performed during the month. In addition, billed $7,500 to other customers for services performed during the month. Billings are due in 30 days. July 30: Paid commissions of $9,500 to the technicians for July. Required Prepare journal entries on the books of Krittersbegone to record the transactions entered into during the month. Ignore depreciation expense. Prepare a classified balance sheet dated July 31. From the balance sheet, what cash inflow and what cash outflow can you predict in the month of August? Who would be interested in the cash flow information? Why?arrow_forward
- Transaction Analysis and Journal Entries Recorded Directly in T Accounts Four brothers organized Beverly Entertainment Enterprises on October 1. The following transactions occurred during the first month of operations: October 1: Received contributions of $10,000 from each of the four principal owners of the new business in exchange for shares of stock. October 2: Purchased the Ace Theater for $125,000. The seller agreed to accept a down payment of $12,500 and a seven-year promissory note for the balance. The Ace property consists of land valued at $35,000, and a building valued at $90,000. October 3: Purchased new seats for the theater at a cost of $5,000, paying $2,500 down and agreeing to pay the remainder in 60 days. October 12: Purchased candy, popcorn, cups, and napkins for $3,700 on an open account. The company has 30 days to pay for the concession supplies. October 13: Sold tickets for the opening-night movie for cash of $1,800 and took in $2,400 at the concession stand. October 17: Rented out the theater to a local community group for $1,500. The community group is to pay one-half of the bill within five working days and has 30 days to pay the remainder. October 23: Received 50% of the amount billed to the community group. October 24: Sold movie tickets for cash of $2,000 and took in $2,800 at the concession stand. October 26: The four brothers, acting on behalf of Beverly Entertainment, paid a dividend of $750 on the shares of stock owned by each of them, or $3,000 in total. October 27: Paid $500 for utilities. October 30: Paid wages and salaries of $2,400 total to the ushers, projectionist, concession stand workers, and maintenance crew. October 31: Sold movie tickets for cash of $1,800 and took in $2,500 at the concession stand. Required Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1. Identify each transaction with a date. Record each transaction directly in T accounts using the dates preceding the transactions to identify them in the accounts. Each account involved in the problem needs a separate T account.arrow_forwardFinancial statements The assets and liabilities of Global Travel Agency on December 31, 20Y5, and its revenue and expenses for the year are as follows: Common stock was 525,000 and retained earnings was 1,250,000 as of January 1, 20Y5. During the year, additional common stock of 50,000 was issued for cash, and dividends of 90,000 were paid. Instructions 1. Prepare an income statement for the year ended December 31, 20Y5. 2. Prepare a statement of stockholders equity for the year ended December 31, 20Y5. 3. Prepare a balance sheet as of December 31, 20Y5. 4. What items appears on both the statement of stockholders equity and the balance sheet?arrow_forwardJournal Entries Atkins Advertising Agency began business on January 2. The transactions entered into by Atkins during its first month of operations are as follows: Acquired its articles of incorporation from the state and issued 100,000 shares of capital stock in exchange for $200,000 in cash. Purchased an office building for $150,000 in cash. The building is valued at $110,000, and the remainder of the value is assigned to the land. Signed a three-year promissory note at the bank for $125,000. Purchased office equipment at a cost of $50,000, paying $10,000 down and agreeing to pay the remainder in ten days. Paid wages and salaries of $13,000 for the first half of the month. Office employees are paid twice a month. Paid the balance due on the office equipment. Sold $24,000 of advertising during the first month. Customers have until the 15th of the following month to pay their bills. Paid wages and salaries of $15,000 for the second half of the month. Recorded $3,500 in commissions earned by the salespeople during the month. They will be paid on the fifth of the following month. Required Prepare in journal form the entry to record each transaction.arrow_forward
- ORGANIZATION COSTS BB Electric decided to incorporate and has incurred the following costs of organizing: Incorporation fees 400 Attorneys fees 4,800 Promotion expenses 5,700 Prepare the entry for the payment of these organization costs for cash on January 31.arrow_forwardMulkeen Service Company, Incorporated, was incorporated by Conor Mulkeen and five other managers. The following activities occurred during the year: Received $78,000 cash from the managers; each was issued 2,200 shares of common stock. Purchased equipment for use in the business at a cost of $17,400; one-fourth was paid in cash and the company signed a note for the balance (due in six months). Signed an agreement with a cleaning service to pay it $145 per week for cleaning the corporate offices, beginning next year. Conor Mulkeen borrowed $30,000 for personal use from a local bank, signing a one-year note. Required: For each of the above transactions, record its effects in the appropriate T-accounts. Assume all beginning balances are zero. Please dont provide solution in image format thnksarrow_forwardFollowing information is from first month of operations. Make a Mulit Step Income Statement 1/1 Ray incorporated B&C Inc and invested $100,000 in exchange for 100,000 shares of $1 par common stock. 1/1 Paid $9,000 for the first 6 months of rent (Jan-June) on a production facility. 1/1 Paid $4,200 for an insurance premium on a one-year policy. 1/1 Purchased a $15,000 piece of factory equipment with a 3% Note Payable which will be paid in full at the end of 2 years. This equipment has an estimated life of 5 years and an estimated residual value of $3,000. 1/2 Purchased $600 of supplies from Office Hoard Corp on account with terms 2/10, n/30. 1/3 Purchased $50,000 of raw materials from Chemical Supply Inc on account. 1/5 Requisitioned $10,000 of raw materials to begin working on Job A (a batch of doodads) and another $7,000 of raw materials to begin working on Job B. 1/8 Paid off account with Office Hoard Corp with cash. 1/10 Incurred $2,500 worth of direct labor costs while…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
IAS 29 Financial Reporting in Hyperinflationary Economies: Summary 2021; Author: Silvia of CPDbox;https://www.youtube.com/watch?v=55luVuTYLY8;License: Standard Youtube License