Financial Accounting
Financial Accounting
5th Edition
ISBN: 9781259914898
Author: SPICELAND
Publisher: MCG
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Chapter 1, Problem 4PA
To determine

Ascertain the missing amounts.

Expert Solution & Answer
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Answer to Problem 4PA

  1. a) Salary expense $23,000.
  2. b) Net Income: $6,000.
  3. c) Net Income: $6,000.
  4. d) Accounts Payable: $4,900.
  5. e) Common Stock: $11,100.
  6. f) Retained Earnings at the end: $10,000.
  7. g) Total liabilities and Stockholders ‘equity: $26,000.

Explanation of Solution

(c)

Net income: The bottom line of income statement which is the result of excess of earnings from operations (revenues) over the costs incurred for earning revenues (expenses) is referred to as net income.

First, calculate the amount of net income from the statement of stockholders’ equity.

Calculate the amount of net income:

Net Income = [(Retained earnings at the end)+Dividends paid(Retained earnings at the beginning)] = $10,000+$3,000$7,000= $6,000

(b)

From the above calculation (c), it is noted that the net income is $6,000.

(a)

Expenses: Expenses are costs incurred for the operations of a business. The costs incurred for generating revenues are rent expense, depreciation expense, general and administrative expenses, selling expenses, and salaries expense.

Calculate the amount of salary expense.

SalaryExpense=(TotalRevenuesAdvertisingexpenseUtilitiesExpenseNetincome)=$39,000$6,000$4,000$6,000=$23,000

Hence, from the above calculation, it is noted that the amount of salary expense is $23,000.

(e)

Common stock: Common stock is the instrument used by the company for raising funds from the general public, through issuing common or ordinary shares to the stockholders. This is an investment for the shareholders for which they receive the dividends from the issuing company, and have voting rights.

Calculate the amount of common stock:

Corporation B
Statement of Stockholders' equity
For the year ended December 31,2021
ParticularsCommon StockRetained earningsTotal Stockholders' equity
Balance at the beginning$10,000$7,000$17,000
Add:
Issuance of stock$1,100$1,100
Net Income$6,000 (1)$6,000 (1)
 $11,100
Less:
Dividends Paid($3,000)($3,000)
Balance at the end$11,100$10,000$21,100

Table (1)

Hence, from the above calculation, it is noted that the amount of common stock is $11,100.

Working note:

Calculate the amount of net income:

Net Income = [(Retained earnings at the end)+Dividends paid(Retained earnings at the beginning)] = $10,000+$3,000$7,000= $6,000

(1)

(f)

Retained earnings: Retained earnings are that portion of profits which are earned by a company but not distributed to stockholders in the form of dividends. These earnings are retained for various purposes like expansion activities, or funding any future plans.

Calculate the amount of retained earnings:

Corporation B
Statement of Stockholders' equity
For the year ended December 31,2021
ParticularsCommon StockRetained earningsTotal Stockholders' equity
Balance at the beginning$10,000$7,000$17,000
Add:
Issuance of stock$1,100$1,100
Net Income$6,000 (1)$6,000 (1)
 $11,100
Less:
Dividends Paid($3,000)($3,000)
Balance at the end$11,100$10,000$21,100

Table (2)

Thus, from the above calculation, it is noted that the amount of retained earnings is $10,000.

(g)

Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relation between resources or assets of a business and claims on the resources by the creditors, and the owners.

Calculate the amount of total liabilities and stockholders’ equity.

According to accounting equation, total assets equals to total liabilities and stockholders’ equity. It is given that the value of Total assets is $26,000; therefore, total liabilities and stockholders’ equity would be $26,000.

(d)

Calculate the amount of accounts payable:

Accountpayable(Liabilities)=AssetsTotalstockholders'equity= $26,000$21,100=$4,900

Therefore, from the above calculation it is identified that the amount of accounts payable is $4,900.

Note: Accounts payable is treated as total liabilities.

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Chapter 1 Solutions

Financial Accounting

Ch. 1 - Prob. 11SSQCh. 1 - Prob. 12SSQCh. 1 - Prob. 13SSQCh. 1 - Prob. 14SSQCh. 1 - Prob. 15SSQCh. 1 - Applying Excel #1–1 Below are three relationships...Ch. 1 - Applying Excel #1-2 A company reports the...Ch. 1 - 1. Explain what it means to say that an accounting...Ch. 1 - Prob. 2RQCh. 1 - 3. What is the basic difference between financial...Ch. 1 - 4. What are the two primary functions of financial...Ch. 1 - 5. What are line three basic business activities...Ch. 1 - Prob. 6RQCh. 1 - 7. What arc a few of the typical investing...Ch. 1 - Prob. 8RQCh. 1 - Prob. 9RQCh. 1 - 10. Provide the basic definition for each of the...Ch. 1 - Prob. 11RQCh. 1 - 12. What are the four primary financial...Ch. 1 - Prob. 13RQCh. 1 - Prob. 14RQCh. 1 - Prob. 15RQCh. 1 - Prob. 16RQCh. 1 - 17. “The retained earnings account is a link...Ch. 1 - Prob. 18RQCh. 1 - Prob. 19RQCh. 1 - 20. How does financial accounting have an impact...Ch. 1 - Prob. 21RQCh. 1 - Prob. 22RQCh. 1 - Prob. 23RQCh. 1 - Prob. 24RQCh. 1 - Prob. 25RQCh. 1 - 26. What are the three primary objectives of...Ch. 1 - Prob. 27RQCh. 1 - Prob. 28RQCh. 1 - Prob. 29RQCh. 1 - 30. What is meant by the term cost effectiveness...Ch. 1 - Prob. 31RQCh. 1 - BE1–1 Indicate whether the definition provided is...Ch. 1 - BE1–2 Match each business activity with its...Ch. 1 - Prob. 3BECh. 1 - BE1–4 Match each account type with its...Ch. 1 - BE1–5 For each transaction, indicate whether each...Ch. 1 - BE1–6 For each transaction, indicate whether each...Ch. 1 - Describe each financial statement (LO1–3) BE1–7...Ch. 1 - Determine the location of items in financial...Ch. 1 - Prob. 9BECh. 1 - Prob. 10BECh. 1 - Prob. 11BECh. 1 - Prob. 12BECh. 1 - Prob. 13BECh. 1 - E1–1 The following provides a list of transactions...Ch. 1 - E1–2 Falcon Incorporated has the following...Ch. 1 - Identify account classifications and business...Ch. 1 - E1–4 Eagle Corp. operates magnetic resonance...Ch. 1 - E1–5 Cougar’s Accounting Services provides...Ch. 1 - E1–6 Below are the account balances for Cowboy Law...Ch. 1 - Prob. 7ECh. 1 - E1–8 Wolfpack Construction has the following...Ch. 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 - P1–1A Below are typical transactions for...Ch. 1 - Prob. 2PACh. 1 - Prepare financial statements (LOI-3) P1-3A...Ch. 1 - Prob. 4PACh. 1 - Prob. 5PACh. 1 - P1–6A The four underlying assumptions of generally...Ch. 1 - Prob. 7PACh. 1 - P1–1B Below are typical transactions for...Ch. 1 - Prob. 2PBCh. 1 - Prepare financial statements (LO1-3) P1-3B Gator...Ch. 1 - Prob. 4PBCh. 1 - Prepare financial statements (LO1-3) P1-5B Tar...Ch. 1 - Prob. 6PBCh. 1 - Prob. 7PBCh. 1 - Prob. 1APCh. 1 - American Eagle Outfitters, Inc. AP1-2 Financial...Ch. 1 - Prob. 3APCh. 1 - Prob. 4APCh. 1 - Prob. 5APCh. 1 - Written Communication AP1-7 Maria comes to you for...
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