
Concept explainers
a.
Prepare a
a.

Explanation of Solution
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.
Prepare a balance sheet as of December 31 of the Year 2012.
Incorporation LJ | ||||
Balance sheet as on December 31, 2012 | ||||
Amount ($) | Amount ($) | Amount ($) | ||
Assets | Liabilities | |||
Cash | 20,000 | Accounts Payable | 9,000 | |
Accounts receivable | 33,000 | Mortgage Payable | 100,000 | |
Land | 40,000 | Total liabilities | 109,000 | |
Building, net | 260,000 | Stockholders' equity | ||
Equipment, net | 45,000 | Common stock | 220,000 | |
Supplies | 18,000 | 87,000 | ||
Total stockholders’ equity | 307,000 | |||
Total assets | $416,000 | Total liabilities and stockholders’ equity | $416,000 |
Table (1)
Prepare a balance sheet as of December 31 of the Year 2013.
Incorporation LJ | ||||
Balance sheet as on December 31, 2013 | ||||
Amount ($) | Amount ($) | Amount ($) | ||
Assets | Liabilities | |||
Cash | 23,000 | Accounts Payable | 6,000 | |
Accounts receivable | 42,000 | Mortgage Payable | 90,000 | |
Land | 40,000 | Total liabilities | 96,000 | |
Building, net | 250,000 | Stockholders' equity | ||
Equipment, net | 43,000 | Common stock | 220,000 | |
Supplies | 20,000 | Retained earnings | 102,000 | |
Total stockholders’ equity | 322,000 | |||
Total assets | $418,000 | Total liabilities and stockholders’ equity | $418,000 |
Table (2)
Working notes:
Calculate the retained earnings for the year 2012.
Calculate the retained earnings for the year 2013.
b.
Prepare a statement of stockholders’ equity for 2013.
b.

Explanation of Solution
Statement of stockholder’ equity:
This statement reports the beginning stockholders’ equity and all the changes, which led to ending stockholders’ equity. Additional capital, net income from income statement is added to and drawings are deducted from beginning stockholders’ equity to arrive at the result, ending stockholders’ equity.
Prepare a statement of stockholders’ equity for 2013.
Incorporation LJ | |
Statement of stockholders' equity | |
For the year ended December 31, 2013 | |
Particulars | Amount ($) |
Retained Earnings, Beginning (Refer Table (1)) | 87,000 |
Add: Net income | 25,000 |
112,000 | |
Less: Dividends | 10,000 |
Retained Earnings, Ending (Refer Table (2)) | $102,000 |
Table (3)
Working note:
Calculate the net income.
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