Fundamental Financial Accounting Concepts, 9th Edition
Fundamental Financial Accounting Concepts, 9th Edition
9th Edition
ISBN: 9780078025907
Author: Thomas P Edmonds, Christopher Edmonds, Frances M McNair, Philip R Olds
Publisher: McGraw-Hill Education
Question
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Chapter 2, Problem 42BP
To determine

Find the missing amounts in the given financial statements.

Expert Solution & Answer
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Answer to Problem 42BP

Find the missing amounts in the given financial statements.

 201620172018
Income Statements
Revenue$400500$800
Expense (250)(l) (400)(425)
Net Income (Loss)
  1. (a) $150
$100$375
 
Statements of Changes in Stockholders’ Equity
Beginning Common Stock$0(m) $8,000$9,100
Plus: Common Stock Issued(b) 8,0001,100310
Ending Common Stock8,0009,100(s) 9,410
 
Beginning Retained Earnings02575
Plus: Net Income (Loss)(c) 150 100375
Less: Dividends(d) (125)(50)(150)
Ending Retained Earnings25(n) 75300
Total Stockholders’ Equity(e) $8,025$9,175(t) $9,710
 
Balance Sheets
Assets 
Cash(f) $11,000(o) $6,650(u)$8,050
Land0(p) 5,0002,500
Total Assets$11,000$11,650$10,550
 
Liabilities(g) $2,975(q) $2,475$840
Stockholders’ Equity 
Common Stock(h) 8,000(r) 9,1009,410
Retained Earnings(i) 2575300
Total Stockholders’ Equity8,0259,1759,710
Total Liabilities and Stockholders’ Equity$11,000$11,650$10,550
 
Statements of Cash Flows
Cash Flows From Operating Activities: 
   Cash Receipts from Customers(j)$400$500(v) $800
   Cash Payments for Expenses(k) (250)(400)(w) (425)
Net Cash Flows from Operating Activities150100375
Cash Flows From Investing Activities:
Cash Payments for Land0(5,000)0
Cash receipt from sale of land002,500
Net Cash Flows from investing Activities0(5,000)2,500
Cash Flows From Financial Activities:
    Cash Receipts from Loan2,9750-0-
  Cash Payments to Reduce Debt0(500)(x) (1,635)
    Cash Receipts from Stock Issue8,0001,100(y) 310
   Cash Payments for Dividends(125)(50)(z) (150)
Net Cash Flows from Financial Activities10,850 550(1,475)
Net Change in Cash11,000(4,350)1,400
Plus: Beginning Cash Balance011,0006,650
Ending Cash Balance$11,000$ 6,650$ 8,050

Table (1)

Explanation of Solution

Balance Sheet: Balance Sheet summarizes 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.

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.

Statement of stockholder's equity: This statement reports the beginning stockholder's equity and all the changes which led to ending stockholder's equity. Additional capital, net income from income statement is added to and dividends are deducted from beginning stockholder's equity to arrive at the end result, closing balance of stockholder's equity.

Statement of cash flows: it is one of the financial statements which reports the source and application of cash between two balance sheet dates. It shows how the cash is sourced and used for the company’s operating, investing, and financing activities.

Compute the missing amounts:

  1. a) Compute net income for 2016.

    Net Income =RevenueExpense=$400$250=$150

    Therefore, net income for 2016 is $150.

  2. b) Compute common stock issued in 2016.

    Common stock issued = Ending Common StockOpening Common stock=$8,000$0=$8,000

    Therefore, common stock issued in 2016 is $8,000.

  3. c) Compute net income for 2016.

    Net income for 2016 is $150 (refer requirement a).

  4. d) Compute the dividends for 2016.

    Dividends =Beginning Retained Earnings+Net IncomeEnding Retained Earnings=$0+$150$25=$125

    Therefore, dividend amount for 2016 is $125.

  5. e) Compute the total stockholders’ equity.

    Total Stockholders’ Equity = Ending Common Stock+ Ending Retained Earnings=$8,000+$25=$8,025

    Therefore, the total stockholders’ equity for 2016 is $8,025.

  6. f) Compute the cash balance for 2016.

    Cash balance for the 2016 is $11,000 (as given in the cash flow statement).

  7. g) Compute the liabilities amount as on 2016 balance sheet.

    Liabilities =Total Liabilities and Stockholders EquityStockholders'Equity=$11,000$8,025=$2,975

    Therefore, liabilities amount as on 2016 balance sheet is $2,975.

  8. h) Compute the common stock amount as on 2016 balance sheet.

    Common stock issued during 2016 is $8,000 (refer statement of changes in stockholders’ equity) and there is no beginning balance of common stock. Therefore $8,000 is the common stock amount as on 2016 balance sheet.

  9. i) Compute the retained earnings as on 2016 balance sheet.

    $25 is reported has ending balance of retained earnings in the statement of changes in stockholders equity. Thus, $25 is the retained earnings as on 2016 balance sheet.

  10. j) Compute the cash receipts from customers.

    In the income statement, revenues are $400. As mentioned all transactions are the cash transactions. Thus, the revenues are the cash receipts from the customers.

    Therefore, cash receipts from the customers are $400.

  11. k) Compute the cash payments for expenses.

    In the income statement, expenses are $250. As mentioned, all transactions are the cash transactions. Thus, the expenses are reported as cash payments for expenses.

    Therefore, cash payments for expenses are $250.

  12. l) Compute the expenses for 2017.

 Expense =RevenueNet Income=$500$100=$400

Therefore, expenses for 2017 are $400.

  1. m) Compute the beginning common stock for 2017

    Ending common stock of 2016 is the beginning common stock of the 2017. Thus, the beginning common stock of 2017 is $8,000.

  2. n) Compute the ending retained earnings of 2017.

    2016’s ending retained earnings $25 is the beginning retained earnings of 2017.

    Ending Retained Earnings =BeginningRetained Earnings+Net IncomeDividends=$25+$100$50=$75

    Therefore, ending retained earnings for 2017 is $75.

  3. o) Compute the cash balance as on 2017 balance sheet.

    Cash balance for the 2017 is $6,650 (as given in the cash flow statement of 2017).

  4. p) Compute the land balance as on 2017 balance sheet.

     Land =Total AssetsCash balance=$11,650$6,650=$5,000

    Therefore, land balance as on 2017 balance sheet is $5,000.

  5. q) Compute the liabilities as on 2017 balance sheet.

    Liabilities =Total Liabilities and Stockholders EquityStockholders'Equity=$11,650$9,175=$2,475

    Therefore, liabilities amount as on 2017 balance sheet is $2,475.

  6. r) Compute the common stock as on 2017 balance sheet.

    Ending balance of common stock in the statement of changes in stockholders equity is $9,100.  It is reported as a common stock as on balance sheet of 2017

  7. s) Compute the Ending common stock of 2018’s statement of changes in the stockholders’ equity.

    Ending Common StockBeginning Common stock+Common stock issued=$9,100$310=$9,410

    Therefore, ending common stock for 2018 is $9,410.

  8. t) Compute the total stockholders’ equity as on 2018 balance sheet.

    Total Stockholders’ Equity = Ending Common Stock+ Ending Retained Earnings=$9,410+$300=$9,710

    Therefore, the total stockholders’ equity for 2018 is $9,710.

  9. u) Compute the cash balance for 2018 balance sheet.

Cash balance for the 2018 is $8,050 (as given in the cash flow statement).

  1. v) Compute the cash receipts from customers.

    In the income statement, revenues are $800. As mentioned all transactions are the cash transactions. Thus, the revenues are the cash receipts from the customers.

    Therefore, cash receipts from the customers are $800.

  2. w) Compute the cash payments for expenses.

    In the income statement, expenses are $425. As mentioned, all transactions are the cash transactions. Thus, the expenses are reported as cash payments for expenses.

    Therefore, cash payments for expenses are $425.

  3. x) Compute the cash payment to reduce debt in 2018.

    Cash payment to reduce debt = Liabilities in Year 2017 – Liabilities in Year 2018=$2,475$840=$1,635

    Therefore, $1,635 is the cash payment to reduce debt in 2018.

  4. y) Compute the cash receipt from issue of common stock.

    During the 2018, $310 additional common stock issued for cash (refer statements of changes in the shareholders’ equity of 2018).

    Therefore, cash receipt from issue of common stock is $310.

  5. z) Compute the cash payment for dividends.

    During the 2018, $150 divided paid for cash (refer statements of changes in the shareholders’ equity of 2018).

    Therefore, cash payment for dividend is $150.

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Chapter 2 Solutions

Fundamental Financial Accounting Concepts, 9th Edition

Ch. 2 - Prob. 11QCh. 2 - Prob. 12QCh. 2 - Prob. 13QCh. 2 - Prob. 14QCh. 2 - Prob. 15QCh. 2 - Prob. 16QCh. 2 - Prob. 17QCh. 2 - Prob. 18QCh. 2 - Prob. 19QCh. 2 - Prob. 20QCh. 2 - Prob. 21QCh. 2 - Prob. 22QCh. 2 - Prob. 23QCh. 2 - Prob. 24QCh. 2 - Prob. 25QCh. 2 - Prob. 26QCh. 2 - Prob. 27QCh. 2 - Prob. 28QCh. 2 - Prob. 29QCh. 2 - Prob. 30QCh. 2 - Prob. 31QCh. 2 - Prob. 32QCh. 2 - Prob. 33QCh. 2 - Prob. 34QCh. 2 - Prob. 1AECh. 2 - Prob. 2AECh. 2 - Prob. 3AECh. 2 - Prob. 4AECh. 2 - Prob. 5AECh. 2 - Prob. 6AECh. 2 - Prob. 7AECh. 2 - Prob. 8AECh. 2 - Prob. 9AECh. 2 - Prob. 10AECh. 2 - Prob. 11AECh. 2 - Prob. 12AECh. 2 - Prob. 13AECh. 2 - Prob. 14AECh. 2 - Prob. 15AECh. 2 - Prob. 16AECh. 2 - Prob. 17AECh. 2 - Prob. 18AECh. 2 - Prob. 19AECh. 2 - Prob. 20AECh. 2 - Prob. 21AECh. 2 - Prob. 22AECh. 2 - Prob. 23AECh. 2 - Prob. 24AECh. 2 - Prob. 25AECh. 2 - Prob. 26AECh. 2 - Prob. 27AECh. 2 - Prob. 28AECh. 2 - Prob. 29AECh. 2 - Prob. 30AECh. 2 - Prob. 31AECh. 2 - Prob. 32AECh. 2 - Prob. 33AECh. 2 - Prob. 34AECh. 2 - Prob. 35AECh. 2 - Prob. 36AECh. 2 - Prob. 37APCh. 2 - Prob. 38APCh. 2 - Prob. 39APCh. 2 - Prob. 40APCh. 2 - Prob. 41APCh. 2 - Prob. 42APCh. 2 - Prob. 43APCh. 2 - Prob. 44APCh. 2 - Prob. 45APCh. 2 - Prob. 1BECh. 2 - Prob. 2BECh. 2 - Prob. 3BECh. 2 - Prob. 4BECh. 2 - Prob. 5BECh. 2 - Prob. 6BECh. 2 - Prob. 7BECh. 2 - Prob. 8BECh. 2 - Prob. 9BECh. 2 - Prob. 10BECh. 2 - Prob. 11BECh. 2 - Prob. 12BECh. 2 - Prob. 13BECh. 2 - Prob. 14BECh. 2 - Prob. 15BECh. 2 - Prob. 16BECh. 2 - Prob. 17BECh. 2 - Prob. 18BECh. 2 - Prob. 19BECh. 2 - Prob. 20BECh. 2 - Prob. 21BECh. 2 - Prob. 22BECh. 2 - Prob. 23BECh. 2 - Prob. 24BECh. 2 - Prob. 25BECh. 2 - Prob. 26BECh. 2 - Prob. 27BECh. 2 - Prob. 28BECh. 2 - Prob. 29BECh. 2 - Prob. 30BECh. 2 - Prob. 31BECh. 2 - Prob. 32BECh. 2 - Prob. 33BECh. 2 - Prob. 34BECh. 2 - Prob. 35BECh. 2 - Prob. 36BECh. 2 - Prob. 37BPCh. 2 - Prob. 38BPCh. 2 - Prob. 39BPCh. 2 - Prob. 40BPCh. 2 - Prob. 41BPCh. 2 - Prob. 42BPCh. 2 - Prob. 43BPCh. 2 - Prob. 44BPCh. 2 - Prob. 45BPCh. 2 - Prob. 1ATCCh. 2 - Prob. 3ATCCh. 2 - Prob. 4ATCCh. 2 - Prob. 5ATCCh. 2 - Prob. 6ATCCh. 2 - Prob. 7ATCCh. 2 - Prob. 8ATCCh. 2 - Prob. 9ATCCh. 2 - Prob. 10ATCCh. 2 - Prob. 1CP
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