Chapter 8, Problem 18P

a)

To determine

Prepare a 2014 income statement, capital statement, balance sheet, and statement of cash flows for a Company AS owned by Person BB.

Explanation of Solution

Income statement: It is one of the financial statements that 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 forCompany AS the year ended December 31, 2014.

Company AS
Income statement
Forthe year ended December 31, 2014
Particulars	Amount ($)
Revenues	80,000
Less: Expenses	(56,000)
Net income	$24,000

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 Company AS for the year ended December 31, 2014.

Company AS
Capital statement
Forthe year ended December 31, 2014
Particulars	Amount ($)
Beginning Capital Balance	0
Add: Initial Capital from owner	120,000
Add: Net Income	24,000
Less: Withdrawal by owner	(5,000)
Ending Capital Balance	139,000

Table (2)

Balance sheet: Balance Sheet is one of the financial statements that 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 Company AS as on December 31^st, 2014.

Company AS
Balance sheet
Ason December 31, 2014
Particulars	Amount ($)
Assets
Cash	139,000
Total assets	139,000
Liabilities and Equity
Liabilities	0
Equity
BB’s Capital	139,000
Total Liabilities and Equity	139,000

Table (3)

StatementCash flows: Statement of cash flows is a statement showing 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.

Prepare statement of cash flows for year ended December 31^st, 2014 of Company AS.

Company AS
Cash Flow Statement
For the year ended  December 31, 2014
Particulars	Amount ($)	Amount ($)
Cash Flows From Operating Activities:
Receipts from Revenues	80,000
Paid for Expenses	(56,000)
Net Cash Flow from Operating Activities		24,000
Cash Flows From Investing Activities		0
Cash Flows From Financing Activities:
Proceeds from owners	120,000
Paid for Owner’s Withdrawals	(5,000)
Net Cash Flow from Financing Activities		115,000
Net Change in Cash		139,000
Add: Beginning Cash Balance		0
Ending Cash Balance		139,000

Table (4)

b)

To determine

Prepare a 2014 income statement, capital statement, balance sheet, and statement of cash flows for a Partnership AS.

Explanation of Solution

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

Particulars	Amount ($)	Percentage (%)
Capital contributions:
SM’s contribution	72,000	60%
JP’s contribution	48,000	40%
Total capital contribution	120,000	100%
Adjustments to capital account
Revenues (add to capital)	80,000
Expenses (deduct from capital)	56,000
Withdrawals:
SM (deduct from capital)	3,500
JP (deduct from capital)	1,500

Table (5)

Income statement: It is one of the financial statements that 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 PartnershipAS for the year ended December 31, 2014.

Partnership AS
Income statement
Forthe year ended December 31, 2014
Particulars	Amount ($)
Revenues	80,000
Less: Expenses	(56,000)
Net income	24,000

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 PartnershipAS for the year ended December 31, 2014.

PartnershipAS
Capital statement
Forthe year ended December 31, 2014
Particulars	Amount ($)
Beginning Capital Balance	0
Add: initial Capital  from partners	120,000
Add: Net Income	24,000
Less: Withdrawal by partners	(5,000)
Ending Capital Balance	$139,000

Table (7)

Balance sheet: Balance Sheet is one of the financial statements that 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 PartnershipAS as on December 31^st, 2014.

PartnershipAS
Balance sheet
Ason December 31, 2014
Particulars	Amount ($)
Assets
Cash	139,000
Total assets	139,000
Liabilities and Equity
Liabilities	0
Equity
SM’s Capital(1)	78,100
JP’s Capital(1)	60,900
Total Liabilities and Equity	139,000

Table (8)

StatementCash flows: Statement of cash flows is a statement showing 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.

Prepare statement of cash flows for year ended December 31^st, 2014 of Partnership AS.

PartnershipAS
Cash Flow Statement
For the year ended  December 31, 2014
Particulars	Amount ($)	Amount ($)
Cash Flows From Operating Activities:
Receipts from Revenues	80,000
Paid for Expenses	(56,000)
Net Cash Flow from Operating Activities		24,000
Cash Flows From Investing Activities		0
Cash Flows From Financing Activities:
Proceeds from Partners	120,000
Paid for partners’ Withdrawals	(5,000)
Net Cash Flow from Financing Activities		115,000
Net Change in Cash		139,000
Add: Beginning Cash Balance		0
Ending Cash Balance		139,000

Table (9)

Working note:

1. Calculate the ending balance of capital for each partner.

Particulars	BS	JP	Total
Beginning Capital Balance	$0	$0	$0
Investments	72,000	48,000	120,000
Add: Net Income			24,000
SM 40%	9,600
JP 60%		14,400
Less: Withdrawals	(3,500)	(1,500)	(5,000)
Ending Capital Balances	$78,100	$60,900	$139,000

Table (10)

c)

To determine

Prepare a 2014 income statement, statement of changes in stockholders equity, balance sheet, and statement of cash flows for Company AS.

Explanation of Solution

Income statement: It is one of the financial statements that 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 Company AS for the year ended December 31, 2014.

Company AS
Income statement
Forthe year ended December 31, 2014
Particulars	Amount ($)
Revenues	80,000
Less: Expenses	(56,000)
Net income	$24,000

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 Company AS for the year ended December 31, 2014.

Company AS
Statement of changes in stockholders’ equity
Forthe year ended December 31, 2014
Particulars	Amount ($)
Beginning Capital Balance	0
Add: issuance of common stock	120,000
Ending common stock	120,000
Beginning retained earnings	$0
Add: Net Income	24,000
Less: Dividends	(5,000)
Ending retained earnings	$19,000
Total stockholders’ equity	$139,000

Table (12)

Balance sheet: Balance Sheet is one of the financial statements that 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 Company AS as on December 31^st, 2014.

Company AS
Balance sheet
Ason December 31, 2014
Particulars	Amount ($)
Assets
Cash	139,000
Total assets	139,000
Liabilities and Equity
Liabilities	0
Equity
Common stock, $10 par value, 10,000 shares issued and outstanding	100,000
Paid-in capital in excess and outstanding	20,000
Total paid in capital	120,000
Retained earnings	19,000
Total Liabilities and Equity	139,000

Table (13)

StatementCash flows: Statement of cash flows is a statement showing 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.

Prepare statement of cash flows for year ended December 31^st, 2014 of Corporation C.

Company AS
Cash Flow Statement
For the year ended  December 31, 2014
Particulars	Amount ($)	Amount ($)
Cash Flows From Operating Activities:
Receipts from Revenues	80,000
Paid for Expenses	(56,000)
Net Cash Flow from Operating Activities		24,000
Cash Flows From Investing Activities		0
Cash Flows From Financing Activities:
Proceeds from issue of stock	120,000
Paid for Dividends	(5,000)
Net Cash Flow from Financing Activities		115,000
Net Change in Cash		139,000
Add: Beginning Cash Balance		0
Ending Cash Balance		139,000

Table (14)