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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Brief Exercise 1-29

Relationships among the Financial Statements

Listed below are three independent scenarios.

Chapter 1, Problem 29BE, Brief Exercise 1-29 Relationships among the Financial Statements Listed below are three independent

Required:

Compute the missing amount in each row. Assume no withdrawals or dividends.

To determine

Concept Introduction:

Financial statements: Financial statements are prepared to summaries the account at the end of the period. The statements prepared are Income statement, Balance sheet, Statement of owner’s equity and Cash flows statements.

Statement of Retained earnings:

Items reported on a retained earnings statement are explained as follows:

  • Beginning Balance of Retained earnings is the ending balance of the retained earnings of the previous year.
  • Net Income or Net loss is the amount of net income earned or net loss incurred for the year.
  • Dividends Paid are taken for the year.
  • Ending Balance of Retained earnings is calculated as follows:

Ending Balance of Retained earnings = Beginning Balance of Retained earnings + Net Income − Net income − Dividends Paid

To Calculate:

The missing amount for each of the given scenario.

Explanation

The missing amounts for each of the given scenario are calculated as follows:

    ScenarioBalance Sheet: Retained earningsIncome Statement: Net Income Balance Sheet: Retained earnings
    1 $ 30,000 $ 25,000 $ 55,000

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