Chapter 2, Problem 1P

a.

Summary Introduction

To compute: The income statement and balance sheet of BRCMM Co using formulas.

Introduction: Income Statement’ shows the revenue earned and expenses incurred over a period of time. It is used to compute the net income for a particular period.

Explanation of Solution

The income statement for the company has been prepared:

  

Working note: Preparation of income statement and computation of net income has been shown below:

  

The balance sheet for the company has been prepared:

  

Working note: Preparation of balance sheet has been shown below:

  

b.

Summary Introduction

To compute: Create a statement of cash flows for 2016.

Introduction: A cash flow statement shows the aggregate data regarding all the cash inflows and outflows of a company. It considers only cash transactions, any non-cash transaction is mentioned as a footnote.

Explanation of Solution

The cash flow statement for the company has been prepared:

  

Working note: Preparation of cash flow statement and computation of net cash flow has been shown below:

  

c.

Summary Introduction

To show: Cash flow statement using outline feature.

Introduction: A cash flow statement shows the aggregate data regarding all the cash inflows and outflows of a company. It considers only cash transactions, any non-cash transaction is mentioned as a footnote.

Explanation of Solution

Cash flow statement can be shown using outline feature as:

  

Steps to perform outline:

1. Select the entire particulars column.
2. Go to ‘Data’ tab.
3. Click on sub-total.
4. Select ‘Count’ as ‘Use function’.
5. Click on ok.

Working note: The cash flow statement for the company has been prepared.

  

d.

Summary Introduction

To compute: If sales were $400000 instead of $3,69,300 in 2016 then compute the net income & retained earnings

Introduction: Income Statement’ shows the revenue earned and expenses incurred over a period of time. It is used to compute the net income for a particular period.

Explanation of Solution

The revised net income could be calculated by changing the net sales figure for 2016:

  

Retained earnings would change automatically as shown below:

  

Working notes:

Calculation of net income:

  

Computation of retained earnings:

  

Conclusion

If sales were $400000 instead of $3,69,300 in 2016 then net income is $33,405& retained earnings is $68,605.

e.

Summary Introduction

To compute: If tax rate was 35% instead of 40% in 2016 then compute the net income & retained earnings.

Introduction: Income Statement’ shows the revenue earned and expenses incurred over a period of time. It is used to compute the net income for a particular period.

Explanation of Solution

The revised net income could be calculated by changing tax rate figure for 2016:

  

Calculated revised retained earnings:

  

Computation of revised net income:

  

Computation of retained earnings: