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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Missing amounts from financial statements

The financial statements at the end of Wolverine Realty’s first month of operations are as follows:

Chapter 1, Problem 1.6APR, Missing amounts from financial statements The financial statements at the end of Wolverine Realtys , example  1

Chapter 1, Problem 1.6APR, Missing amounts from financial statements The financial statements at the end of Wolverine Realtys , example  2

Chapter 1, Problem 1.6APR, Missing amounts from financial statements The financial statements at the end of Wolverine Realtys , example  3

Chapter 1, Problem 1.6APR, Missing amounts from financial statements The financial statements at the end of Wolverine Realtys , example  4

Instructions

By analyzing the interrelationships among the four financial statements, determine the proper amounts for (a) through (q).

To determine

Financial statements:

Financial statements refer to those statements, which are prepared by the Company according to particular formats in accounting to show its financial position.

Financial statements include the following statements:

Income statement:

Income statement is a financial statement that shows the net income or net loss by deducting the expenses from the revenues and vice versa.

Statement of owner's’ equity:

This statement reports the changes in the owners’ equity for a particular period of time

Statement of cash flows:

This statement reports all the cash transactions which 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.

To Determine:  The missing amount in the given financial statement of Company WR.

Explanation

Calculate the missing amounts in the given financial statement of Company WR for month ended April 30, 2016.

Company WR
Income Statement
For the month ended April 30, 2016
Particulars Amount ($) Amount ($)
Revenues
     Fees earned
  1. (a)  $750,000
Expenses
     Wages expense $300,000
     Rent expense $100,000
     Supplies expense (b)  $30,000
     Utilities expense $20,000
     Miscellaneous expense $25,000
Total expenses $475,000
Net income $275,000

Table (1)

Company WR
Statement of Owner's Equity
For the month ended April 30, 2016
Particulars Amount ($) Amount ($)
DR Capital, April 1, 2016 (c)   $0
Investment on April 1,2016 $375,000
Net income for the month (d)   $275,000
Changes before withdrawals (e)     $650,000
Less: Withdrawals $125,000
Increase in Owner's equity (f)   $525,000
DR Capital, April 30, 2016 (g)   $525,000

Table (2)

Company WR
Balance Sheet
April 30, 2016
Particulars Amount ($) Amount ($)
Assets
 Current Assets
 Cash $462,500
 Supplies $12,500
 Land $150,000
 Total current assets (h)   $625,000
Liabilities and Stockholders’ Equity
 Liabilities
 Accounts payable $100,000
 Owner's equity 
 DR Capital (i)   $525,000
 Total liabilities and stockholders’ equity (j)   $625,000

Table (3)

Company WR
Statement of Cash Flows
For the month ended April 30, 2016
Particulars Amount ($) Amount ($)
Cash flows from operating activities:
Cash receipts from customers(k)    $750,000
Cash payments for expenses and creditors $387,500
Net cash flow used for operating activities (l)      $362,500
Cash flows from investing activities:
Cash payment for acquisition of land (m) ($150,000)
Cash flows from financing activities:
Cash receipt of owner’s investment (n)  $375,000
Cash Withdrawals (o)  $125,000
Net cash flow from financing activities (p)  $250,000
Net Increase in cash, April 30,2016 cash balance(q)  $462,500

Table (4)

Working Notes:

  1. a) Fees Earned: Fees earned during the month of April is $750,000.

    Calculate the fees earned.

    Net Income  =  Revenue  ExpenseRevenue  =  Net Income + Expense=  $475,000 + $275,000=  $750,000 (a)

  2. b) Supplies expense: Supplies expense during the month of April is $30,000.

Calculate the supplies expense.

Expenses = [(WageExpense)+(RentExpense)+(SuppliesExpense)+(UtilitesExpense)+(MiscellaneousExpense)]$475,000=$300,000+$100,000+(SuppliesExpense)+$20,000+$25,000$475,000=$445,000+(Supplies Expense)Supplies Expense=$475,000$445,000=$30,000 (b)

  1. c) DR Capital, April 1, 2016:  As this is the first month of operation for Company WR, there will be having no opening balance for the Capital account

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