Transactions for Year 1 Acquired $55,000 by issuing common stock. Received $130,000 cash for providing services to customers. Borrowed $22,000 cash from creditors. Paid expenses amounting to $59,000. Purchased land for $40,000 cash. Transactions for Year 2 Beginning account balances for Year 2 are: Cash $ 108,000 Land 40,000 Notes payable 22,000 Common stock 55,000 Retained earnings 71,000 Acquired an additional $20,000 from the issue of common stock. Received $131,000 for providing services. Paid $17,000 to creditors to reduce loan. Paid expenses amounting to $66,000. Paid a $11,500 dividend to the stockholders. Determined that the market value of the land is $50,000. Required a. Record the effects of each accounting event under the appropriate headings for each year. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide appropriate titles for these accounts in the last column of the table. b-1. Prepare an income statement for each year accounting period. b-2. Prepare a statement of changes in stockholders’ equity for each year accounting period. b-3. Prepare a year-end balance sheet for each year accounting period. b-4. Prepare a statement of cash flows for each year accounting period. c. Determine the amount of cash that is in the retained earnings account at the end of Year 1 and Year 2. e. Determine the balance in the Retained Earnings account immediately after Event 2 in Year 1 is recorded and after Event 2 in Year 2 is recorded.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Transactions for Year 1

Acquired $55,000 by issuing common stock.
Received $130,000 cash for providing services to customers.
Borrowed $22,000 cash from creditors.
Paid expenses amounting to $59,000.
Purchased land for $40,000 cash.

Transactions for Year 2

Beginning account balances for Year 2 are:


Cash	$	108,000
Land		40,000
Notes payable		22,000
Common stock		55,000
Retained earnings		71,000

Acquired an additional $20,000 from the issue of common stock.
Received $131,000 for providing services.
Paid $17,000 to creditors to reduce loan.
Paid expenses amounting to $66,000.
Paid a $11,500 dividend to the stockholders.
Determined that the market value of the land is $50,000.

Required
a. Record the effects of each accounting event under the appropriate headings for each year. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide appropriate titles for these accounts in the last column of the table.
b-1. Prepare an income statement for each year accounting period.
b-2. Prepare a statement of changes in stockholders’ equity for each year accounting period.
b-3. Prepare a year-end balance sheet for each year accounting period.
b-4. Prepare a statement of cash flows for each year accounting period.
c. Determine the amount of cash that is in the retained earnings account at the end of Year 1 and Year 2.
e. Determine the balance in the Retained Earnings account immediately after Event 2 in Year 1 is recorded and after Event 2 in Year 2 is recorded.

Event
Beg. bal.
1.
2.
3.
4.
5.
6.
Totals
Cash
Assets
+
++
+
+
+
+
0 +
Land
MARK'S CONSULTING SERVICES
Accounting Equation for Year 2
=
0] =
Liabilities +
Notes
Payable
+
+
+
+
+
0 +
Stockholders' Equity
Common
Stock
+
+
+
+
+
+
0 +
Retained
Earnings
0
Account Titles for
Retained Earnings

Event
1.
2.
3.
4.
5.
Totals
Cash
Assets
+
+
++
+
0 +
Land
MARK'S CONSULTING SERVICES
Accounting Equation for Year 1
0 =
Liabilities
Notes
Payable
+
+
0 +
Stockholders' Equity
Common
Stock
+
+
+
+
+
+
0 +
Retained
Earnings
Account Titles for
Retained Earnings

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