Fundamental Financial Accounting Concepts
Fundamental Financial Accounting Concepts
10th Edition
ISBN: 9781259918186
Author: Thomas P Edmonds, Christopher Edmonds, Frances M McNair, Philip R Olds
Publisher: McGraw-Hill Education
Question
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Chapter 11, Problem 22AP

a)

To determine

Prepare a Year 1 income statement, capital statement, balance sheet, and statement of cash flows for a sole proprietorship owned by Person C.

a)

Expert Solution
Check Mark

Explanation of Solution

Income statement:

It is one of the financial statements which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare the income statement of for C’s sole proprietorship the year ended December 31, Year 1.

C’s sole proprietorship
Income statement
For the year ended December 31, Year 1
ParticularsAmount ($)
Revenues35,000
Less: Expenses(18,100)
Net income16,900

Table (1)

Statement of owner's’ equity:

This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity. Additional capital, net income from income statement is added to and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.

Prepare the capital account of C’s sole proprietorship for the year ended December 31, Year 1.

C’s sole proprietorship
Capital statement
For the year ended December 31, Year 1
ParticularsAmount ($)
Beginning Capital Balance0
Add: initial Capital  from partners60,000
Add: Net Income16,900
Less: Withdrawal by person C(4,000)
Ending Capital Balance72,900

Table (2)

Balance sheet:

Balance Sheet is one of the financial statements which summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the balance sheet of C’s sole proprietorship as on December 31st, year 1.

C’s sole proprietorship
Balance sheet
As on December 31, Year 1
ParticularsAmount ($)
Assets 
Cash72,900
Total assets72,900
Liabilities and Equity
Liabilities0
Equity 
C’s Capital72,900
Total Liabilities and Equity72,900

Table (3)

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.

Prepare statement of cash flows for year ended December 31st, Year 1 of C’s sole proprietorship.

C’s sole proprietorship
Cash Flow Statement
For the year ended  December 31, Year 1
ParticularsAmount ($)Amount ($)
Cash Flows From Operating Activities:  
Receipts from Revenues35,000 
Paid for Expenses(18,100) 
Net Cash Flow from Operating Activities 16,900
Cash Flows From Investing Activities 0
Cash Flows From Financing Activities:  
Proceeds from owners60,000 
Paid for Owner’s Withdrawals(4,000) 
Net Cash Flow from Financing Activities 56,000
Net Change in Cash 72,900
Add: Beginning Cash Balance 0
Ending Cash Balance 72,900

Table (4)

b)

To determine

Prepare a Year 1 income statement, capital statement, balance sheet, and statement of cash flows for a partnership C.

b)

Expert Solution
Check Mark

Explanation of Solution

Calculate the capital contributions and determine the adjustments to the capital account.

ParticularsAmount ($)Percentage (%)
Capital contributions:  
CC’s contribution24,00040%
JC’s contribution36,00060%
Total capital contribution60,000100%
   
Adjustments to capital account  
Revenues (add to capital)35,000 
Expenses (deduct from capital)18,100 
Withdrawals:  
CC (deduct from capital)1,600 
BC (deduct from capital)2,400 

Table (5)

Income statement:

It is one of the financial statements which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare the income statement of a partnership C for the year ended December 31, Year 1.

Partnership C
Income statement
for the year ended December 31, Year 1
ParticularsAmount ($)
Revenues35,000
Less: Expenses(18,100)
Net income16,900

Table (6)

Statement of owner's’ equity:

This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity. Additional capital, net income from income statement is added to and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.

Prepare the capital account of Partnership C for the year ended December 31, Year 1.

Partnership C
Capital statement
for the year ended December 31, Year 1
ParticularsAmount ($)
Beginning Capital Balance0
Add: initial Capital  from partners60,000
Add: Net Income16,900
Less: Withdrawal by partners(4,000)
Ending Capital Balance72,900

Table (7)

Balance sheet:

Balance Sheet is one of the financial statements which summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the balance sheet of Partnership C as on December 31st, year 1.

Partnership C
Balance sheet
as on December 31, Year 1
ParticularsAmount ($)
Assets 
Cash72,900
Total assets72,900
  
Liabilities and Equity
Liabilities0
Equity 
CC’s Capital (1)29,160
 BC’s Capital (1)43,740
Total Liabilities and Equity72,900

Table (8)

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.

Prepare statement of cash flows for year ended December 31st, Year 1 of Partnership C.

Partnership C
Cash Flow Statement
For the year ended  December 31, Year 1
ParticularsAmount ($)Amount ($)
Cash Flows From Operating Activities:  
Receipts from Revenues35,000 
Paid for Expenses(18,100) 
Net Cash Flow from Operating Activities 16,900
   
Cash Flows From Investing Activities 0
   
Cash Flows From Financing Activities:  
Proceeds from Partners60,000 
Paid for partners’ Withdrawals(4,000) 
Net Cash Flow from Financing Activities 54,000
   
Net Change in Cash 72,900
Add: Beginning Cash Balance 0
Ending Cash Balance 72,900

Table (9)

Working note:

Calculate the ending balance of capital for each partner.

ParticularsCCBCTotal
Beginning Capital Balance$0$0$0
Investments24,00036,00060,000
Add: Net Income  16,900
CC 40%6,760  
BC 60% 10,140 
Less: Withdrawals(1,600)(2,400)(4,000)
Ending Capital Balances$29,160$43,740$72,900

…… (1)

Table (10)

c)

To determine

Prepare a Year 1 income statement, statement of changes in stockholders equity, balance sheet, and statement of cash flows for Corporation C.

c)

Expert Solution
Check Mark

Explanation of Solution

Income statement:

It is one of the financial statements which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Prepare the income statement of Corporation C for the year ended December 31, Year 1.

Corporation C
Income statement
For the year ended December 31, Year 1
ParticularsAmount ($)
Revenues35,000
Less: Expenses(18,100)
Net income16,900

Table (11)

Statement of owner's’ equity:

This statement reports the beginning owner’s equity and all the changes which led to ending owner's’ equity. Additional capital, net income from income statement is added to and drawings are deducted from beginning owner’s equity to arrive at the end result, ending owner’s equity.

Prepare the capital account of Corporation C for the year ended December 31, Year 1.

Corporation C
Statement of changes in stockholders’ equity
For the year ended December 31, Year 1
ParticularsAmount ($)
Beginning Capital Balance0
Add: issuance of common stock60,000
Ending common stock60,000
  
Beginning retained earnings$0
Add: Net Income16,900
Less: Dividends(4,000)
Ending retained earnings$12,900
  
Total stockholders’ equity72,900

Table (12)

Balance sheet:

Balance Sheet is one of the financial statements which summarize the assets, the liabilities, and the Shareholder’s equity of a company at a given date. It is also known as the statement of financial status of the business.

Prepare the balance sheet of Corporation C as on December 31st, year 1.

Corporation C
Balance sheet
As on December 31, Year 1
ParticularsAmount ($)
Assets 
Cash72,900
Total assets72,900
 
Liabilities and Equity
Liabilities0
Equity 
Common stock, $5 par value, 5000 shares issued and outstanding25,000
Paid-in capital in excess and outstanding35,000
Total paid in capital60,000
Retained earnings12,900
Total Liabilities and Equity72,900

Table (13)

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.

Prepare statement of cash flows for year ended December 31st, Year 1 of Corporation C.

Corporation C
Cash Flow Statement
For the year ended  December 31, Year 1
ParticularsAmount ($)Amount ($)
Cash Flows From Operating Activities:  
Receipts from Revenues35,000 
Paid for Expenses(18,100) 
Net Cash Flow from Operating Activities 16,900
   
Cash Flows From Investing Activities 0
   
Cash Flows From Financing Activities:  
Proceeds from issue of stock60,000 
Paid for Dividends(4,000) 
Net Cash Flow from Financing Activities 54,000
   
Net Change in Cash 72,900
Add: Beginning Cash Balance 0
Ending Cash Balance 72,900

Table (14)

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Chapter 11 Solutions

Fundamental Financial Accounting Concepts

Ch. 11 - Prob. 11QCh. 11 - Prob. 12QCh. 11 - Prob. 13QCh. 11 - Prob. 14QCh. 11 - Prob. 15QCh. 11 - Prob. 16QCh. 11 - Prob. 17QCh. 11 - Prob. 18QCh. 11 - Prob. 19QCh. 11 - Prob. 20QCh. 11 - Prob. 21QCh. 11 - Prob. 22QCh. 11 - Prob. 23QCh. 11 - Prob. 24QCh. 11 - Prob. 25QCh. 11 - Prob. 26QCh. 11 - Prob. 27QCh. 11 - Prob. 28QCh. 11 - Prob. 29QCh. 11 - Prob. 30QCh. 11 - Prob. 31QCh. 11 - Prob. 32QCh. 11 - Prob. 1AECh. 11 - Prob. 2AECh. 11 - Prob. 3AECh. 11 - Prob. 4AECh. 11 - Prob. 5AECh. 11 - Prob. 6AECh. 11 - Prob. 7AECh. 11 - Prob. 8AECh. 11 - Prob. 9AECh. 11 - Prob. 10AECh. 11 - Prob. 11AECh. 11 - Prob. 12AECh. 11 - Prob. 13AECh. 11 - Prob. 14AECh. 11 - Prob. 15AECh. 11 - Prob. 16AECh. 11 - Prob. 17AECh. 11 - Prob. 18AECh. 11 - Prob. 19AECh. 11 - Prob. 20AECh. 11 - Prob. 21APCh. 11 - Prob. 22APCh. 11 - Prob. 23APCh. 11 - Prob. 24APCh. 11 - Prob. 25APCh. 11 - Prob. 26APCh. 11 - Prob. 27APCh. 11 - Prob. 28APCh. 11 - Prob. 29APCh. 11 - Prob. 30APCh. 11 - Prob. 1BECh. 11 - Prob. 2BECh. 11 - Prob. 3BECh. 11 - Prob. 4BECh. 11 - Prob. 5BECh. 11 - Prob. 6BECh. 11 - Prob. 7BECh. 11 - Prob. 8BECh. 11 - Prob. 9BECh. 11 - Prob. 10BECh. 11 - Prob. 11BECh. 11 - Prob. 12BECh. 11 - Prob. 13BECh. 11 - Prob. 14BECh. 11 - Prob. 15BECh. 11 - Prob. 16BECh. 11 - Prob. 17BECh. 11 - Prob. 18BECh. 11 - Prob. 19BECh. 11 - Prob. 20BECh. 11 - Prob. 21BPCh. 11 - Prob. 22BPCh. 11 - Prob. 23BPCh. 11 - Prob. 24BPCh. 11 - Prob. 25BPCh. 11 - Prob. 26BPCh. 11 - Prob. 27BPCh. 11 - Prob. 28BPCh. 11 - Prob. 29BPCh. 11 - Prob. 30BPCh. 11 - Prob. 1ATCCh. 11 - Prob. 3ATCCh. 11 - Prob. 4ATCCh. 11 - Prob. 5ATCCh. 11 - Prob. 6ATCCh. 11 - Prob. 7ATCCh. 11 - Prob. 8ATCCh. 11 - Prob. 9ATCCh. 11 - Prob. 10ATCCh. 11 - Prob. 1CP
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