Concept explainers
(a)
Income statement
This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. Income statement is also known as operations statement, earnings statement, revenue statement, or
This is a financial statement that shows the amount of the net income retained by a company at a particular point of time for reinvestment, and pays its debts and obligations. It shows the amount of retained earnings that is not paid as dividends to the shareholders.
Balance sheet
This is a financial statement that shows the available assets and claims to assets of a company at a particular point of time. Both the amount of assets and claims to assets remains always equal. Claims to assets are segregated into two categories, one is claims of creditors (liabilities) and the other is claims of stockholders (Stockholders’ equity).
This statement helps users to know about the creditworthiness of a company as to whether the company has enough assets to pay off its liabilities. The primary constituents of balance sheet are the assets, the liabilities and the
To prepare: An income statement and a retained earnings statement for Company ES for the month of June and balance sheet at June 30, 2017.
(b)
To discuss: whether Company ES’s first month of operations was a success.
(c)
To discuss: Company ES’s decision to distribute a dividend.
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- Income Statement and Balance Sheet Fort Worth Corporation began business in January 2016 as a commercial carpet-cleaning and drying service. Shares of stock were issued to the owners in exchange for cash. Equipment was purchased by making a down payment in cash and signing a note payable for the balance. Services are performed for local restaurants and office buildings on open account, and customers are given 15 days to pay their accounts. Rent for office and storage facilities is paid at the beginning of each month. Salaries and wages are paid at the end of the month. The following amounts are from the records of Fort Worth Corporation at the end of its first month of operations: Required Prepare an income statement for the month ended January 31, 2016. Prepare a balance sheet at January 31, 2016. What information would you need about Notes Payable to fully assess Fort Worths longterm viability? Explain your answer.arrow_forwardStatement of Retained Earnings Landon Corporation was organized on January 2, 2014, with the investment of $100,000 by each of its two stockholders. Net income for its first year of business was $85,200. Net income increased during 2015 to $125,320 and to $145,480 during 2016. Landon paid $20,000 in dividends to each of the two stockholders in each of the three years. Required Prepare a statement of retained earnings for the year ended December 31, 2016.arrow_forwardThe balance sheet for the company at December 31, 2015, indicated that total assets were $173,000, total liabilities were $61,000, and Common Stock had a balance of $72,000. At December 31, 2016, assets had increased by $40,000 and there had been no change in the amount of Common Stock. Additional information for 2016 included the following: Revenues $143,000 Expenses 88,000 Dividends 9,000 What were the total liabilities on December 31, 2016? Answer pleaserarrow_forward
- On December 31, 2016, Cantor Company reported Total Assets of $20,000 and Total equity of $15,000. In 2017, the company’s Total Assets went up $5,000 and liabilties went up $3000. Revenue was 80,000 and expenses were 70,000. Dividends paid were 6,000. Determine the company’s balance of owners equity for 2017.arrow_forwardThomas Corporation began business by issuing $2,000 of common stock on January 1, 2010. The business performed $8,000 of service on account in 2010 and collected $6,000 of this amount by year-end. It paid operating expenses of $4,500 and paid a $500 dividend to stockholders. a) What is the amount of total assets at the end of 2010? b) What is the amount of cash on hand at the end of 2010? c) What is the net income for 2010?arrow_forwardTowson Company’s Assets and Liabilities on January 1, 2016 were $85,600 and $62,400 respectively. During the year 2016, the stockholders invested an additional $5,500, while the company generated $14,300 of revenues, and incurred $7,900 of expenses. If the company’s assets and liabilities on December 31, 2016 were $101,300 and $67,500 respectively, determine the dividends paid by the company during 2016.arrow_forward
- Algonquin Inc. began operations on August 1, 2013. As per its second year, Algonquin Inc.’s accounting system showed the information below. During the second year, additional shares of $3000 were issued. Complete the income statement, statement of changes in equity, and balance sheet. Accounts receivable $17,000 Accounts payable $3,000 Advertising Expense $ 5,000 Cash $ 9,000 Dividends $ 2,000 Insurance Expense $ 7,000 Machinery $ 14,000 Note payable $ 18,000 Retained Earnings $ 6,000 Salaries Expense $ 64,000 Service Revenue $ 81,000 Share Capital $ 10,000arrow_forwardDuring 2017, its first year of operations as a delivery service, Bramble Corp. entered into the following transactions. 1. Issued shares of common stock to investors in exchange for $119,000 in cash. 2. Borrowed $38,000 by issuing bonds. 3. Purchased delivery trucks for $64,000 cash. 4. Received $15,000 from customers for services performed. 5. Purchased supplies for $6,000 on account. 6. Paid rent of $4,300. 7. Performed services on account for $11,300. 8. Paid salaries of $26,700. 9. Paid a dividend of $10,800 to shareholders. Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders’ Equity in the far right column.arrow_forwardStrong construction company earned $439,000 during the year ended June 30, 2017. After paying out $225,794 in dividends, the balance went into retained earnings. If the firm’s total earnings were $842,180 at the end of fiscal year 2017, what were the retained earnings on its balance sheet on July 1 ,2016?arrow_forward
- Mijka Company was started on January 1, 2018. During 2018, the company experienced the following three accounting events: (1) earned cash revenues of $32,200, (2) paid cash expenses of $14,400, and (3) paid a $2,700 cash dividend to its stockholders. These were the only events that affected the company during 2018. given the following information prepare a balance sheet according to the date of dec 31, 2018arrow_forwardOn December 31, 2024, Rachel Cooking Services reports the following revenues and expenses. Service revenue $ 77,000 Rent expense $ 10,800 Postage expense 1,600 Salaries expense 26,000 Legal fees expense 2,500 Supplies expense 15,500 In addition, the balance of common stock at the beginning of the year was $300,000, and the balance of retained earnings was $36,000. During the year, the company issued additional shares of common stock for $27,000 and paid dividends of $14,000. Required: Prepare an income statement. Prepare a statement of stockholders’ equity.arrow_forwardPlease see below. All info is included. During 2017, Ivanhoe Company entered into the following transactions. 1. Purchased equipment for $317,240 cash. 2. Issued common stock to investors for $135,850 cash. 3. Purchased inventory of $65,970 on account. Using the following tabular analysis, show the effect of each transaction on the accounting equation. For Retained Earnings, use separate columns for Revenues, Expenses, and Dividends if necessary. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3-3 for example.) Assets = Liabilities + Stockholders’ Equity Cash + Inventory + Equipment = Accounts Payable + Common Stock + Retained Earnings (1) $enter a dollar amount $enter a dollar amount $enter a dollar amount $enter a dollar amount…arrow_forward
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