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Missing amounts from financial statements
The financial statements at the end of Atlas Realty’s first month of operations follow:
Instructions
By analyzing the interrelationships among the four financial statements, determine the proper amounts for (a) through (r).
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Calculate the amount of (a) through (r), analyzing the financial statements.
Explanation of Solution
Financial statements: Financial statements are condensed summary of transactions communicated in the form of reports for the purpose of decision making.
Calculate the amount of (a) through (r), analyzing the financial statements:
The financial statements of Company AR or month ended May 31, 20Y6, are given below:
Company AR | ||
Income Statement | ||
For the month ended May 31, 20Y6 | ||
Particulars | Amount ($) | Amount ($) |
Revenues | ||
Fees earned | $400,000 | |
Expenses | ||
Wages expense | (a) $203,200 | |
Rent expense | $48,000 | |
Supplies expense | $17,600 | |
Utilities expense | $14,400 | |
Miscellaneous expense | $4,800 | |
Total expenses | $288,000 | |
Net income | (b) $112,000 |
Table (1)
Hence the net income of Company AR for month ended May 31, 20Y6, is $112,000.
Company AR | |||
Statement of Stockholder's Equity | |||
For the month ended May 31, 20Y6 | |||
Particulars | Common Stock | Retained Earnings | Total |
Balances, May 1, 20Y6 | $0 | $0 | $0 |
Issued common stock | (c) $160,000 | (c) $160,000 | |
Net income | (d) $112,000 | (d) $112,000 | |
Dividends | (e) ($64,000) | (e) ($64,000) | |
Balances, May 31, 20Y6 | (c) $ 160,000 | (f) $ 48,000 | (g) $ 208,000 |
Table (2)
Hence the stockholder's equity of Company AR for month ended May 31, 20Y6, is $208,000.
Company AR | ||
Balance Sheet | ||
As on May 31, 20Y6 | ||
Particulars | Amount ($) | Amount ($) |
Assets | ||
Current Assets | ||
Cash | $123,200 | |
Supplies | $12,800 | |
Land | (h) $120,000 | |
Total current assets | (i) $256,000 | |
Liabilities and Stockholders’ Equity | ||
Liabilities | ||
Accounts payable | $48,000 | |
Stockholder's equity | ||
Common Stock | (j) $160,000 | |
Retained earnings | (k) $48,000 | |
Total stockholders’ equity | (l) 208,000 | |
Total liabilities and stockholders’ equity | (m) $256,000 |
Table (3)
Hence the financial statement of Company AR shows the same asset and total liabilities and stockholder's equity balance of $256,000 for month ended May 31, 20Y6.
Company AR | ||
Statement of Cash Flows | ||
For the month ended May 31, 20Y6 | ||
Particulars | Amount ($) | Amount ($) |
Cash flows from operating activities: | ||
Cash receipts from customers | (n) $400,000 | |
Cash payments for expenses and creditors | $252,800 | |
Net cash flow used for operating activities | (o) $147,200 | |
Cash flows from investing activities: | ||
Cash payment for purchase of land | $120,000 | |
Cash flows from financing activities: | ||
Cash receipt of owner’s investment | $160,000 | |
Cash Withdrawals | $64,000 | |
Net cash flow from financing activities | (p) $96,000 | |
Net Increase (decrease) in cash | (q) $123,200 | |
Cash balance, May 1, 20Y6 | $0 | |
Cash balance, May 31, 20Y6 | (r) $123,200 |
Table (4)
Hence the cash balance of Company AR on May 31, 20Y6, is $123,200.
Working Notes:
- a) Wages expense:
Calculate the wages expense.
Wages expense during the month of May is $203,200.
- b) Net income:
Calculate the net income.
Net income during the month of May is $112,000.
- c) Common Stock:
Common Stock of $160,000, shown in the statement of cash flow is transferred to balance sheet.
- d) Net income for May:
Net income is provided in the income statement is transferred to the statement of stockholder’s equity. Net income during the month of May is $112,000.
- e) Dividends:
Dividends of $64,000, provided in the statement of cash flow are transferred to the statement of retained earnings.
- f) Retained earnings, May 31, 20Y6:
Calculate increase in the retained earnings of Company AR.
The retained earnings on May 31, 20Y6 are $48,000.
- g) Stockholder's equity:
The Stockholder's equity of Company AR is $208,000.
- h) Land:
Land of $120,000, shown in the statement of cash flow is transferred to the balance sheet.
- i) Total Assets:
Calculate the total assets.
The sum of total assets is $256,000.
- j) Common Stock:
Common Stock of $160,000, shown in the statement of cash flow is transferred to balance sheet.
- k) Retained earnings:
Retained earnings of $48,000, calculated in the statement of retained earnings are transferred to the balance sheet.
- l) Total stockholders’ equity:
Calculate the total stockholder’s equity.
Total stockholder's equity is $208,000.
- m) Total liabilities and stockholders’ equity:
Calculate the total liabilities and stockholder’s equity.
The total liabilities and stockholder's equity is $256,000.
- n) Cash receipts from customers:
This includes all the income generated and received in the form of cash in the month of May, is $400,000 and it is transferred from income statement.
- o) Net cash flow used for operating activities:
Calculate the cash flow used for operating activities.
The cash flow used for operating activities in the month of May, is $147,200.
- p) Net cash flow from financing activities:
Calculate the net cash flow from financing activities.
The cash flow from financing activities in the month of May is $96,000.
- q) Net Increase in cash:
The net increase in cash balance is $123,200 and it is transferred from balance sheet.
- r) Cash balance, May 31, 20Y6:
Net Increase in cash, May 31, 20Y6 cash balance is $123,200 and it is transferred from balance sheet.
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