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Question The accountant for Franklin Company prepared the following list of account balances from the company’s records for the year ended
December 31, 2011:
Fees Earned
$165,000
Cash
$ 30,000
Accounts Receivable
14,000
Selling Expenses
44,000
Equipment
64,000
Franklin,
Capital
27,000
Accounts Payable
12,000
Interest Income
3,000
Salaries & Wages Expense
40,000
Prepaid Rent
2,000
Income Taxes Payable
5,000
Income Taxes Expense
18,000
Notes Payable
20,000
Rent Expense
20,000
Determine the total assets at the end of 2011 for Franklin Company.
Answer
$110,000
($30,000 Cash + $14,000 Accounts Receivable + $64,000 Equipment + 2,000 Prepaid Rent = $110,000)
Determine the total liabilities at the end of 2011 for Franklin Company.
Answer
$37,000
($12,000 Accounts Payable + $5,000 Income Taxes Payable + $20,000 Notes Payable = $37,000)
Based on this information, is Franklin Company profitable? Explain your answer.
Answer
($165,000 Fees Earned + $3,000 Interest Income) - ($40,000 Salaries & Wages Expense + $44,000 Selling Expenses + $18,000 Income
Taxes Expense + $20,000 Rent Expense) = $46,000 Net Income
Franklin Cormpany had net income for the period of $46,000. Since revenues exceeded expenses for the period, the company would be
considered profitable.
Question The assets and liabilities of Amos Moving Services at March 31, 2011, the end of the current year, and its revenue and expenses for the
year are listed below. The capital of the owner was $180,000 at April 1, 2010, the beginning of the current year. Mr. Amos invested an additional
$25,000 in the business during the year.
Accounts Payable
$1,200
Miscellaneous Expense
$230
Accounts Receivable
$10,340
Office Expense
$1,240
Cash
$32,320 Supplies
$1,670
Fees Earned
$84,350
Wages Expense
$23,550
Land
$47,000 Drawing
$16,570
Building
$157,630
Prepare an income statement for the current year ended March 31, 2011.
Answer
Amos Moving Services
Income Statement
For the Year Ended March 31, 2011
Fees Earned
$84,350
Expenses:
Wages
Expense
$23,550
Office
Expense
1,240
Miscellaneous Expense
230
Total
Expenses
25,020
Net Income
$59,330
Prepare a statement of owner’s equity for the current year ended March 31, 2011.
Statement of Owner’s Equity
Amos, capital, April 1, 2010
$180,000
Additional investment by owner during year
$25,000
Net Income for the year
59,330
Subtotal
$84,330
Less withdrawals
16,570
Increase in owner’s equity
67,760
Amos, capital March 31, 2011
$247,760
Prepare a balance sheet for the current year ended March 31, 2011.
Balance Sheet
March 31, 2011
Assets
Liabilities
Cash
$32,320 Accounts Payable
$ 1,200
Accounts Receivable
10,340
Supplies
1,670
Land
47,000
Owner’s Equity
Building
157,630 Amos, Capital
247,760
Total Assets
$248,960 Total Liabilities and Owner’s Equity
$248,960
Question A summary of cash flows for Alex Design Services for the year ended December 31, 2012, is shown below.
Cash receipts:
Cash received from customers
$83,990
Cash received from additional investment by owner
25,000
Cash payments:
Cash paid for expenses
$27,000
Cash paid for land
47,000
Cash paid for supplies
410
Drawing
5,000
The cash balance as of January 1, 2012
$40,600
Prepare a statement of cash flows for Alex Design Services for the year ended December 31, 2012.
Alex Design Services
Statement of Cash Flows
For the Year Ended December 31, 2012
Cash flows from operating activities:
Deduct cash payments for expenses and supplies
(27,410)
Net cash flows from operating expenses
$56,580
Cash flows from investing activities:
Cash investment received from owner
25,000
Deduct cash withdrawals from owner
(5,000)
Net cash flows from financing activities
20,000
Net increase in cash during year
$ 29,580
Cash as of January 1, 2012
40,600
Cash as of December 31, 2012
$70,180
Question The total assets and the total liabilities of a business at the beginning and at the end of the year appear below. During the year, the
owner had withdrawn $60,000 for personal use and had made an additional investment of $45,000 in the business.
Assets
Liabilities
Beginning of year
$305,000
$200,000
End of year
365,000
230,000
Calculate the net income for the year.
Answer
$45,000
Assets
Liabilities
Beginning of year
$ 305,000
$ 200,000
End of year
$ 365,000
$ 230,000
Change
$ 60,000
$ 30,000
Based on the change in asset and liabilities, owner's equity increased by $30,000 for the year. Owner investment - owner withdrawal =
$15,000 decrease in equity, making the net income $45,000 ($15,000 + $30,000).
Question What information does the Income Statement give to business users?
Answer
The Income Statement reports the revenues and expenses for a period of time. The result is either a Net Income or a Net Loss.
Question What are the three sections of the Statement of Cash Flows?
Answer
Operating Activities, Investing Activities, and the Financing Activities
Question Match the following accounts to the financial statement where they can be found. (Hint: Some of the accounts can be found in more than
one financial statement.)
A. Balance Sheet
B. Income Statement
C. Statement of Cash Flows
D. Statement of Owner’s Equity
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