Chapter 1, Problem 1.21EX

a)

To determine

Income statement: The financial statement 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 is referred to as income statement.

Balance sheet: This financial statement reports a company’s resources (assets) and claims of creditors (liabilities) and stockholders (stockholders’ equity) over those resources. The resources of the company are assets which include money contributed by stockholders and creditors. Hence, the main elements of the balance sheet are assets, liabilities, and stockholders’ equity.

To Prepare: The balance sheet of Company EI for the February and March.

b)

To determine

The amount of net income for the month of March, assuming that the owner made no additional investments or dividends during the month.

c)

To determine

The amount of net income for the month of March, assuming that the owner made no additional investments but withdrew $50,000 during the month.