Chapter 2, Problem 2.3P

P2-3 Financial statements The following amounts were taken from the accounting records of Padget Home Services, Inc.. as of December 31, 20Y7. Padget Home Services began its operations on January 1, 20Y7.

Instructions

Prepare an income statement for the year ending December 31. 2017.

Prepare a statement of stockholdessrs’ equity for the year ending December 31, 2017.

Prepare a balance sheet as of December 31, 2017.

Prepare a statement of cash flows for the year ending December 31, 2017.

To determine

Concept Introduction:

Financial statements:

Financial statements are prepared to summaries the account at the end of the period. The statements prepared are Income statement, Balance sheet, Statement of owner's equity and Cash flows statements.

Requirement-1:

To Prepare:

The Income Statement for the year ending Dec 31, 20Y7

Answer to Problem 2.3P

The Income Statement for the year ending Dec 31, 20Y7 is as follows:

Padget Home Services
Income Statement
For the Year ending Dec. 31, 20Y7
Revenue:
Fees Earned	$ 620,000
Total Revenue		$ 620,000
Less: Expenses:
Salaries Expense	$ 272,000
Rent Expense	$ 70,000
Interest Expense	$ 4,800
Misc. Expense	$ 10,200
Tax Expense	$ 43,000
Utilities Expense	$ 85,000
Total Expenses		$ 485,000
Net Income (Loss)		$ 135,000

Explanation of Solution

The Income Statement for the year ending Dec 31, 20Y7 is prepared as follows:

Padget Home Services
Income Statement
For the Year ending Dec. 31, 20Y7
Revenue:
Fees Earned	$ 620,000
Total Revenue		$ 620,000
Less: Expenses:
Salaries Expense	$ 272,000
Rent Expense	$ 70,000
Interest Expense	$ 4,800
Misc. Expense	$ 10,200
Tax Expense	$ 43,000
Utilities Expense	$ 85,000
Total Expenses		$ 485,000
Net Income (Loss)		$ 135,000

To determine

Concept Introduction:

Financial statements:

Financial statements are prepared to summaries the account at the end of the period. The statements prepared are Income statement, Balance sheet, Statement of owner's equity and Cash flows statements.

Requirement-2:

To Prepare:

The Statement of stockholder's equity for the year ending Dec 31, 20Y7

Answer to Problem 2.3P

The Statement of stockholder's equity for the year ending Dec 31, 20Y7 is as follows:

Padget Home Services
Statement of Stockholder's Equity
For the Year ending Dec. 31, 20Y7
Common Stock	$ 75,000
Retained earnings (135000-15000)	$ 120,000
Total Stockholders' Equity	$ 195,000

Explanation of Solution

The Statement of stockholder's equity for the year ending Dec 31, 20Y7 is prepared as follows:

Padget Home Services
Statement of Stockholder's Equity
For the Year ending Dec. 31, 20Y7
Common Stock	$ 75,000
Retained earnings (135000-15000)	$ 120,000
Total Stockholders' Equity	$ 195,000

To determine

Concept Introduction:

Financial statements:

Financial statements are prepared to summaries the account at the end of the period. The statements prepared are Income statement, Balance sheet, Statement of owner's equity and Cash flows statements.

Requirement-3:

To Prepare:

The Balance Sheet as on Dec 31, 20Y7

Answer to Problem 2.3P

The Balance Sheet as on Dec 31, 20Y7 is as follows:

Padget Home Services
Balance Sheet
As on Dec. 31, 20Y7
ASSETS:
Cash	$ 60,000
Land	$ 215,000
TOTAL		$ 275,000
LIABILITIES:
Notes Payable		$ 80,000
STOCKHOLDER'S EQUITY		$ 195,000
TOTAL		$ 275,000

Explanation of Solution

The Balance Sheet as on Dec 31, 20Y7 is prepared as follows:

Padget Home Services
Balance Sheet
As on Dec. 31, 20Y7
ASSETS:
Cash	$ 60,000
Land	$ 215,000
TOTAL		$ 275,000
LIABILITIES:
Notes Payable		$ 80,000
STOCKHOLDER'S EQUITY		$ 195,000
TOTAL		$ 275,000

To determine

Concept Introduction:

Financial statements:

Financial statements are prepared to summaries the account at the end of the period. The statements prepared are Income statement, Balance sheet, Statement of owner's equity and Cash flows statements.

Requirement-4:

To Prepare:

The Statement of Cash Flows for the year ending Dec 31, 20Y7

Answer to Problem 2.3P

The Statement of Cash Flows for the year ending Dec 31, 20Y7 is as follows:

Padget Home Services
Statement of Cash Flows-Direct Method
For the Year ending Dec. 31, 20Y7
Cash flow from Operating activities:
Collection from Customers	$ 620,000
Payments of expenses	$(485,000)
Net Cash Provided by Operating activities		$ 135,000
Cash flow from Investing activities:
Cash Payment for Acquisition of land	$(215,000)
Net Cash Used by Investing activities		$(215,000)
Cash flow from Financing activities:
Cash Receipts from Issuance of Common Stock	$ 75,000
Cash received from Long Term notes payable	$ 80,000
Payment of Dividends	$ (15,000)
Net Cash Provided by Financing activities		$ 140,000
Net Cash Flows		$ 60,000
Add: Beginning Cash Balance		$ -
Ending Cash Balance		$ 60,000

Explanation of Solution

The Statement of Cash Flows for the year ending Dec 31, 20Y7 is prepared as follows:

Padget Home Services
Statement of Cash Flows-Direct Method
For the Year ending Dec. 31, 20Y7
Cash flow from Operating activities:
Collection from Customers	$ 620,000
Payments of expenses	$(485,000)
Net Cash Provided by Operating activities		$ 135,000
Cash flow from Investing activities:
Cash Payment for Acquisition of land	$(215,000)
Net Cash Used by Investing activities		$(215,000)
Cash flow from Financing activities:
Cash Receipts from Issuance of Common Stock	$ 75,000
Cash received from Long Term notes payable	$ 80,000
Payment of Dividends	$ (15,000)
Net Cash Provided by Financing activities		$ 140,000
Net Cash Flows		$ 60,000
Add: Beginning Cash Balance		$ -
Ending Cash Balance		$ 60,000