Survey Of Accounting
Survey Of Accounting
4th Edition
ISBN: 9780077862374
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
Question
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Chapter 1, Problem 33P

a.

To determine

Prepare an income statement, statement of changes in stockholders’ equity, period-end balance sheet, and statement of cash flows for the year 2014.

a.

Expert Solution
Check Mark

Explanation of Solution

Income statement:

Income statement is the financial statement of a company which shows all the revenues earned and expenses incurred by the company over a period of time.

Prepare income statement:

C Enterprises
Income Statement
For the Period Ended December 31, 2014
Revenue46,000
Expenses(26,000)
Net Income20,000

Table (1)

Statement of changes in stockholders' equity:

Statement of changes in stockholders' equity records the changes in the owners’  equity during the end of an accounting period by explaining about the increase or  decrease in the capital reserves of shares.

Prepare statement of changes in stockholders’ equity:

C Enterprises
Statement of Changes in Stockholders’ Equity
For the Period Ended December 31, 2014
ParticularsAmount ($)Amount ($)
Beginning Common Stock25,000 
Add: Common Stock Issued15,000 
Ending Common Stock $ 40,000
Beginning Retained Earnings35,000 
Add: Net Income20,000 
Less: Dividends(5,000) 
Ending Retained Earnings 50,000
Total Stockholders’ Equity $ 90,000

Table (2)

Note: To know the value of beginning retained earnings refer to Table (5).

Balance sheet:

Balance sheet summarizes the assets, the liabilities, and the stockholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare balance sheet:

C Enterprises
Balance Sheet
As of December 31, 2014
ParticularsAmount ($)Amount ($)
Assets  
Cash$ 95,000 
Total Assets $ 95,000
Liabilities $ 5,000
Stockholders’ Equity  
Common Stock$ 40,000 
Retained Earnings50,000 
Total Stockholders’ Equity 90,000
Total Liabilities and Stockholders’ Equity $ 95,000

Table (3)

Statement of cash flows:

Statement of cash flows is one among the financial statement of a Company statement that shows aggregate data of all cash inflows and cash outflows that is received and paid by the Company from its ongoing business operations.

Prepare statement of cash flows:

C Enterprises
Statement of Cash Flows
For the Year Ended December 31, 2014
ParticularsAmount ($)Amount ($)
Cash Flows From Operating Activities:  
Cash Receipts from Customers46,000 
Cash Payments for Expenses(26,000) 
Net Cash Flow from Operating Activities 20,000
Cash Flows From Investing Activities 0
Cash Flows From Financing Activities:  
Cash Receipts from Stock Issue15,000 
Cash Payments to Creditors(10,000) 
Cash Dividend to Stockholders(5,000) 
Net Cash Flow from Financing Activities 0
Net Increase in Cash 20,000
Add: Beginning Cash Balance 75,000
Ending Cash Balance 95,000

Table (4)

Working note 1: Calculate the value of beginning retained earnings:

C Enterprises
Accounting Equation
  Assets=Liabilities+Stockholders’ Equity
Cash=Liabilities+Common Stock+Retained Earnings
Beg. Balances $ 75,000 $ 15,000 25,000 $ 35,000
Earned Revenue $ 46,000     $ 46,000
Paid Expenses ($ 26,000)     ($ 26,000)
Paid Dividends ($ 5,000)     ($ 5,000)
Issued Stock $ 15,000   15,000  
Paid Liability ($ 10,000) ($ 10,000)    
  $ 95,000=$ 5,000+40,000+$ 50,000

Table (5)

b.

To determine

Calculate the percentage of total assets provided by creditors, investors, and earnings.

b.

Expert Solution
Check Mark

Explanation of Solution

Debt to Asset Ratio:

Debt to asset ratio is the ratio that measures the difference between total asset and total liability of the company. Debt ratio reflects the finance strategy of the company. It is used to evaluate company’s ability to pay its debts. Higher debt ratio implies the higher financial risk.

Percentage of assets provided by creditors is calculated as follows:

Percentageofcreditors'loanontotalassets)=Creditor's loanTotalassets×100=$5,000$95,000×100=5.26%

Stockholders’ equity to asset ratio:

Stockholders ‘equity to asset ratio is the ratio that measures the difference between total asset and stockholders ‘equity of the company. Stockholders’ equity ratio reflects the amount of assets that can be claimed by the stockholders in proportion to the value of shares owned by them.

Percentage of total assets provided by investors is calculated as follows:

Percentageofinvestors'contributionontotalassets)=Investor'scontributionTotalassets×100=$40,000$95,000×100=42.11%

Return on assets:

Return on assets is the financial ratio which determines the amount of net income earned by the business with the use of total assets owned by it. It indicates the magnitude of the company’s earnings with relative to its total assets.

Percentage of total assets provided by retained earnings is calculated as follows:

  Percentageoftotalassetsfromretainedearnings)=RetainedearningsTotalassets×100=50,000$95,000×100=52.63%

c.

To determine

Calculate the balance in the revenue, Expenses, and dividends accounts as of January 1, 2015.

c.

Expert Solution
Check Mark

Explanation of Solution

The balance in the revenue, expenses and dividends is zero as on January 1, 2015, since they were closed to Retained Earnings on December 31, 2014.

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Chapter 1 Solutions

Survey Of Accounting

Ch. 1 - Prob. 11QCh. 1 - 12. Distinguish between elements of financial...Ch. 1 - Prob. 13QCh. 1 - 14. To whom do the assets of a business belong?Ch. 1 - 15. Describe the differences between creditors and...Ch. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - Prob. 18QCh. 1 - 19. What does a double-entry bookkeeping system...Ch. 1 - 22. How does acquiring capital from owners affect...Ch. 1 - Prob. 21QCh. 1 - Prob. 22QCh. 1 - 25. What are the three primary sources of assets?Ch. 1 - 26. What is the source of retained earnings?Ch. 1 - 27. How does distributing assets (paying...Ch. 1 - 28. What are the similarities and differences...Ch. 1 - Prob. 27QCh. 1 - 30. Which of the general-purpose financial...Ch. 1 - 31. What causes a net loss?Ch. 1 - 35. What three categories of cash receipts and...Ch. 1 - Prob. 31QCh. 1 - 37. Discuss the term articulation as it relates to...Ch. 1 - 38. How do temporary accounts differ from...Ch. 1 - Prob. 34QCh. 1 - 41. Identify the three types of accounting...Ch. 1 - Prob. 36QCh. 1 - Prob. 37QCh. 1 - Prob. 1ECh. 1 - Prob. 2ECh. 1 - Prob. 3ECh. 1 - Prob. 4ECh. 1 - Prob. 5ECh. 1 - Prob. 6ECh. 1 - Prob. 7ECh. 1 - Prob. 8ECh. 1 - Prob. 9ECh. 1 - Prob. 10ECh. 1 - Prob. 11ECh. 1 - Prob. 12ECh. 1 - Prob. 13ECh. 1 - Prob. 14ECh. 1 - Prob. 15ECh. 1 - Prob. 16ECh. 1 - Prob. 17ECh. 1 - Prob. 18ECh. 1 - Prob. 19ECh. 1 - Prob. 20ECh. 1 - Prob. 21ECh. 1 - Prob. 22ECh. 1 - Prob. 23ECh. 1 - Prob. 24ECh. 1 - Prob. 25ECh. 1 - Types of transactions and the horizontal...Ch. 1 - Prob. 27ECh. 1 - Prob. 28PCh. 1 - Prob. 29PCh. 1 - Prob. 30PCh. 1 - Prob. 31PCh. 1 - Prob. 32PCh. 1 - Prob. 33PCh. 1 - Prob. 34PCh. 1 - Prob. 1ATCCh. 1 - ATC 1-5 Writing Assignment Elements of financial...
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