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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

The financial statements for Baker Custom Catering for the month of April are presented below.

images

Required

Solve for the missing information.

To determine

Solve the missing information.

Explanation

Financial statement:

Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making. The financial statements reports, and shows the financial status of the business. The financial statements consist of the balance sheet, income statement, statement of retained earnings, and the cash flow statement.

Missing information (a):

In this case, information regarding “Period of time” (For the year ended April 30) is missing in the income statement.

Company B
Income Statement
(a) For the year ended April 30

Table (1)

Missing information (b):

The amount of total expense is missing in the income statement and it is calculated by adding all expenses:

Company B
Income Statement
(a) For the year ended April 30
ParticularsAmount ($)Amount ($)
Revenue:  
Professional Fees 12,000
Expenses:  
Salary Expense800 
Rent Expense1,200 
Utilities Expense360 
Miscellaneous Expense80 
Total Expenses (b) 2,440
Net income 9,560

Table (2)

Therefore, the amount of total expenses is (b) $2,440.

Missing information (c):

In this case, “Name of the Company “(Company B) is missing in the statement of owners’ equity.

(c) Company B
Statement of Owners' equity
 (d) For the year ended April 30

Table (3)

Missing information (d):

In this case, information regarding “Period of time” (For the year ended April 30) is missing in the statement of owners’ equity.

(c) Company B
Statement of Owners' equity
 (d) For the year ended April 30

Table (4)

Missing information (e):

In this case, investments made during the month of April are missing and it is calculated as follows:

(c) Company B
Statement of Owners' equity
 (d) For the year ended April 30
ParticularsAmount($)Amount($)
Person Capital, April 1  
Investments during April (1) (e) 5,000 
Net income for April (f) 9,560 
Subtotal 14,560

Table (5)

Therefore, the amount of investments during April are (e) $5,000.

Working note:

(1) Calculate the amount of investment made during April:

InvestmentsduringApril=Subtotal(f)NetincomeforApril=$14,560$9,560=$5,000

Missing information (f):

In this case, the net income mentioned in the income statement is recorded in the statement of owners’ equity. Therefore, amount of net income is (f) $9,560. The net income or net loss computed in the income statement is reported in the statement of owners’ equity for ascertaining the amount of ending capital balance.

(c) Company B
Statement of Owners' equity
 (d) For the year ended April 30
ParticularsAmount($)Amount($)
Person Capital, April 1  
Investments during April (1) (e) 5,000 
Net income for April (f) 9,560 
Subtotal 14,560

Table (6)

Missing information (g):

In this case, the amount of increase in capital is (g) $13,560 and it is same as the Ending capital of Person L as on April 30, since the amount of beginning capital is given as zero. Suppose, If the amount of beginning capital is given, then the increase in capital is computed by deducting the ending capital from the beginning capital.

(c ) Company B
Statement of Owners' equity
 (d) For the year ended April 30
ParticularsAmount($)Amount($)
Person Capital, April 1  
Investments during April (e) 5,000 
Net income for April (f) 9,560 
Subtotal14,560 
Less: Withdrawals for April1,000 
Increase in capital (g) 13,560
Person L, Capital, April 30 13,560

Table (7)

Note:

The net income or net loss computed in the income statement is reported in the statement of owners’ equity for ascertaining the amount of ending capital balance

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