Concept explainers
Problem 1-2A Computing missing information using accounting knowledge A1 P1
The following financial statement information is from five separate companies.
Company |
A
B
C
D
E
Required
- Answer the following questions about Company A.
- What is the amount of equity on December 31, 2016?
- What is the amount of equity on December 31, 2017? Check ( 1b) $41,500
- What is the amount of liabilities on December 31, 2017?
- Answer the following questions about Company B.
- What is the amount of equity on December 31, 2016?
- What is the amount of equity on December 31, 2017?
- What is net income for year 2017? ( 2c) $1,600
- Compute the amount of assets for Company C on December 31, 2017. (3) $55,875
- Compute the amount of stock issuances for Company D during year 2017.
- Compute the amount of liabilities for Company E on December 31, 2016.
1.
a.
To compute: The amount of equity, of A Company as on December 31, 2016.
Explanation of Solution
Given,
The amount of assets is $55,000.
The amount of liabilities is $24,500.
Formula to calculate equity is,
Substitute$55,000 for assets and $24,500 for liabilities.
Hence, the amount of equity of A Company as on December 31, 2016 is $30,500.
b.
To compute: The amount of equity, of A Company as on December 31, 2017.
Explanation of Solution
Given,
The amount of assets is $58,000.
The amount of equity is $30,500.
Stock issuance is $6,000.
Net income is $8,500.
Cash dividend is $3,500.
Formula to calculate equity is,
Substitute $30,500 for equity in the beginning,, $6,000 for issue of stock, $8,500 for net income, $3,500 for dividend.
Hence, the amount of equity of A company as on December 31, 2017 is $41,500.
c.
To compute: The amount of liabilities, of A Company as on December 31, 2017.
Explanation of Solution
Given,
The amount of assets is $58,000.
The amount of equity is $41,500.
Formula to calculate liabilities is,
Substitute $58,000 for assets and $41,500 for equity.
Hence, the amount of liabilities of A company as on December 31, 2017 is $16,500.
2.
a.
To compute: The amount of equity, of B Company as on December 31, 2016.
Explanation of Solution
Given:
The amount of assets is $34,000.
The amount of liabilities is $21,500.
Formula to calculate equity is,
Substitute $34,000 for assets and $21,500 for liabilities.
Hence, the amount of equity of B Company as on December 31, 2016 is $12,500.
b.
To compute: The amount of equity, of B Company as on December 31, 2017.
Explanation of Solution
Given,
The amount of assets is $40,000.
The amount of liabilities is $26,500.
Formula to calculate equity is,
Substitute$40,000 for assets and $26,500 for liabilities.
Hence, the amount of equity of B Company as on December 31, 2017 is $13,500.
c.
To compute: The net income, of A Company as on December 31, 2017.
Explanation of Solution
Given:
The amount of equity is $12,500 of December 31, 2016.
The amount of equity is $13,500 of December 31, 2017.
Stock issuance is $1,400
Cash dividend is $2,000
Formula to calculate net income is,
Substitute $12,500 for equity in the beginning, $1,400 for issue of stock,$13,500 for equity at the end, $2,000 for dividend.
Hence, the net income of B Company as on December 31, 2017 is $1,600.
3.
To compute: The amount of assets, of C Company as on December 31, 2017.
Explanation of Solution
Given,
The amount of liabilities is $29,000 as on December 31, 2017.
The amount of equity is $26,875 as on December 31, 2017.
Formula to calculate asset is,
Substitute$29,000 for liabilities and $26,875 for equity.
Working notes:
Calculation of the amount of equity as on December 31, 2016,
Calculation of the amount of equity as on December 31, 2017,
Hence, the amount of asset of C Company as on December 31, 2017 is $55,875.
4.
To compute: The amount of stock issuance, of D Company as on December 31, 2017.
Explanation of Solution
Given,
The amount of equity is $20,000 of December 31, 2016.
The amount of equity is $61,000 of December 31, 2017.
Net income is $14,000.
Formula to calculate stock issuance is,
Substitute $20,000 for equity in the beginning, $14,000 for net income, $61,000 for equity at the end.
Working notes:
Calculation of the amount of equity as on December 31, 2016,
Calculation of the amount of equity as on December 31, 2017,
Hence, the amount of stock issuances of D company as on December 31, 2017 is $27,000.
5.
To compute: The amount of liabilities of E Company as on December 31, 2016.
Explanation of Solution
Given,
The amount of assets is $119,000 as on December 31, 2016.
The amount of equity is $27,500 as on December 31, 2016.
Formula to calculate equity is,
Substitute $119,000 for assets and $27,500 for equity.
Working notes:
Calculation of the amount of equity as on December 31, 2017,
Calculation of the amount of equity as on December 31, 2016,
Hence, the amount of liabilities of E company as on December 31, 2016 is $91,500.
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