Chapter 1, Problem 20E

To determine

Identify the missing amounts for the given companies, by the letters.

Explanation of Solution

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 (stockholder’s 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.

a.

Calculate the additional investment of Company F:

Particulars	Amount ($)
Stockholders’ equity at end of year (1)	$930,000
Stockholders’ equity at beginning of year (2)	$540,000
Increase in stockholders’ equity	$390,000
Deduct increase due to net income (3)	$330,000
Increase due to additional investments less withdrawals	$60,000
Add withdrawals	$75,000
Additional common stock issued	$135,000

Table (1)

The additional investment of Company F is $135,000.

Working note (1):

Calculate the Stockholders’ equity for Company F at end of year:

$\begin{array}{c}\begin{array}{l}\text{Stockholders’ equity}\\ \text{at end of year}\end{array}\}\text{= Assets at end of year}-\text{Liabilities at end of year}\\ \text{= \$1,260,000 }-\$330,000\\ =\$930,000\end{array}$

The stockholder's equity for Company F at the end of the year for is $930,000.

Working note (2):

Calculate the Stockholders’ equity for Company F at beginning of year:

$\begin{array}{c}\begin{array}{l}\text{Stockholders’ equity}\\ \text{at beginning of year}\end{array}\}\text{= }\left(\begin{array}{l}\text{Assets at beginning}\\ \text{of year}\end{array}\right)-\left(\begin{array}{l}\text{Liabilities at beginning}\\ \text{of year}\end{array}\right)\\ \text{= \$900,000 }-\$360,000\\ =\$540,000\end{array}$

The stockholder's equity for Company F at the beginning of the year is $540,000.

Working note (3):

Calculate the Net income for Company F during the year:

$\begin{array}{c}\text{Net Income= Revenue }-\text{ Expenses}\\ \text{= \$570,000 }-\text{\$240,000}\\ \text{=\$330,000}\end{array}$

The net income of Company F during the year is $330,000.

b.

Calculate the revenue of Company H:

Particulars	Amount ($)
Stockholders’ equity at end of year (4)	$455,000
Stockholders’ equity at beginning of year (5)	$230,000
Increase in stockholders’ equity	$225,000
Add: Withdrawals	$32,000
Increase due to additional investment and net income	$257,000
Deduct: Additional investment	$150,000
Increase due to Net income	$107,000
Add expenses	$128,000
Revenue	$235,000

Table (2)

The revenue of Company H is $235,000.

Working note (4):

Calculate the Stockholders’ equity at end of year for Company H:

$\begin{array}{c}\begin{array}{l}\text{Stockholders’ equity}\\ \text{at end of year}\end{array}\}\text{= Assets at end of year}-\text{Liabilities at end of year}\\ \text{= \$675,000 }-\$220,000\\ =\$455,000\end{array}$

The stockholder's equity for Company H at the end of the year is $455,000.

Working note (5):

Calculate the Stockholders’ equity for Company H at beginning of year:

$\begin{array}{c}\begin{array}{l}\text{Stockholders’ equity}\\ \text{at beginning of year}\end{array}\}\text{= }\left(\begin{array}{l}\text{Assets at beginning}\\ \text{of year}\end{array}\right)-\left(\begin{array}{l}\text{Liabilities at beginning}\\ \text{of year}\end{array}\right)\\ \text{= \$490,000 }-\$260,000\\ =\$230,000\end{array}$

The stockholder's equity for Company H at the beginning of the year is $230,000.

c.

Calculate the withdrawals from Company J:

Particulars	Amount ($)
Stockholders’ equity at end of year (6)	$20,000
Stockholders’ equity at beginning of year (7)	$34,000
Decrease in stockholders’ equity	(-) $14,000
Add decrease due to net loss (8)	$7,500
Decrease due to withdrawals less additional investment	($6,500)
Deduct additional investment	$10,000
Withdrawals from the business	(-) $16,500

Table (3)

The withdrawals from Company J are $16,500.

Working note (6):

Calculate the Stockholders’ equity for Company J at end of year:

$\begin{array}{c}\begin{array}{l}\text{Stockholders’ equity}\\ \text{at end of year}\end{array}\}\text{= Assets at end of year}-\text{Liabilities at end of year}\\ \text{= \$100,000 }-\$80,000\\ =\$20,000\end{array}$

The stockholder's equity for Company J at the end of the year for is $20,000.

Working note (7):

Calculate the Stockholders’ equity for Company J at beginning of year:

$\begin{array}{c}\begin{array}{l}\text{Stockholders’ equity}\\ \text{at beginning of year}\end{array}\}\text{= }\left(\begin{array}{l}\text{Assets at beginning}\\ \text{of year}\end{array}\right)-\left(\begin{array}{l}\text{Liabilities at beginning}\\ \text{of year}\end{array}\right)\\ \text{= \$115,000 }-\$81,000\\ =\$34,000\end{array}$

The stockholder's equity for Company J at the beginning of the year is $34,000.

Working note (8):

Calculate the net loss for Company J during the year:

$\begin{array}{c}\text{Net Loss= Expenses}-\text{ Revenue }\\ \text{= \$115,000 }-\text{\$122,500}\\ \text{=\$7,500}\end{array}$

The net loss of Company J during the year is $7,500.

d.

Calculate the assets of Company R in beginning of the year:

Particulars	Amount ($)
Stockholders’ equity at end of year (9)	$134,000
Add decrease due to net loss (10)	$13,000
Add withdrawals	$39,000
Owner's equity in the beginning plus additional investment	$186,000
Deduct Additional investment	$55,000
Stockholders’ equity at beginning	$131,000
Add liabilities at the beginning of year	$120,000
Assets at the beginning of the year	$251,000

Table (4)

The assets of Company R in beginning of the year are $251,000.

Working note (9):

Calculate the Stockholders’ equity at end of year for Company R:

$\begin{array}{c}\begin{array}{l}\text{Stockholders’ equity}\\ \text{at end of year}\end{array}\}\text{= Assets at end of year}-\text{Liabilities at end of year}\\ \text{= \$270,000 }-\$136,000\\ =\$134,000\end{array}$

The stockholder's equity for Company R at the end of the year is $134,000.

Working note (10):

Calculate the net loss for Company R during the year:

$\begin{array}{c}\text{Net Loss= Expenses}-\text{ Revenue }\\ \text{= \$115,000 }-\text{\$128,000}\\ \text{=\$13,000}\end{array}$

The net loss of Company R during the year is $13,000.