accounting-cycle-exercises-i.pdf

Accounting Cycle Exercises I Larry M. Walther; Christopher J. Skousen Download free books at Larry M. Walther & Christopher J. Skousen Accounting Cycle Exercises I Download free ebooks at bookboon.com 2 Accounting...

Accounting Cycle Exercises I Larry M. Walther; Christopher J. Skousen Download free books at Larry M. Walther & Christopher J. Skousen Accounting Cycle Exercises I Download free ebooks at bookboon.com 2 Accounting Cycle Exercises I © 2010 Larry M. Walther, Christopher J. Skousen & Ventus Publishing ApS. All material in this publication is copyrighted, and the exclusive property of Larry M. Walther or his licensors (all rights reserved). ISBN 978-87-7681-554-7 Download free ebooks at bookboon.com 3  Accounting Cycle Exercises I Contents Contents Problem 1 6 Worksheet 1 6 Solution 1 8 Problem 2 9 Worksheet 2 10 Solution 2 12 Problem 3 14 Worksheet 3 14 Solution 3 16 Problem 4 17 Worksheet 4 17 Solution 4 18 Problem 5 19 Worksheet 5 20 Solution 5 32 Fast-track your career Please click the advert Masters in Management Stand out from the crowd Designed for graduates with less than one year of full-time postgraduate work experience, London Business School’s Masters in Management will expand your thinking and provide you with the foundations for a successful career in business. The programme is developed in consultation with recruiters to provide you with the key skills that top employers demand. Through 11 months of full-time study, you will gain the business knowledge and capabilities to increase your career choices and stand out from the crowd. 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Wherever you are in your academic career, make your future a part of ours by visiting www.ubs.com/graduates. www.ubs.com/graduates Download free ebooks at bookboon.com 5 Accounting Cycle Exercises I Problem 1: Worksheet Problem 1 Juniper Corporation provided the following summary balance sheet information: Dec. 31, 20X8 Dec. 31, 20X9 Total Assets $2,500,000 $3,800,000 Total Liabilities 900,000 1,300,000 Compute net income for the year ending December 31, 20X9, under each of the following independent scenarios: a) Juniper paid no dividends, and no additional capital was raised via share issuances. b) Juniper paid $300,000 in dividends, and no additional capital was raised via share issuances. c) Juniper paid no dividends, but raised $1,500,000 via issuances of additional shares of stock. d) Juniper paid $300,000 in dividends, and raised $1,150,000 via issuances of additional shares of stock. Worksheet 1 Dec. 31, 20X8 Dec. 31, 20X9 Total Assets $2,500,000 $3,800,000 Total Liabilities 900,000 1,300,000 Total Equity Ending Equity Total Liabilities Total Equity a) Juniper paid no dividends, and no additional capital was raised via share issuances. b) Juniper paid $300,000 in dividends, and no additional capital was raised via share issuances. c) Juniper paid no dividends, but raised $1,500,000 via issuances of additional shares of stock. Download free ebooks at bookboon.com 6 Accounting Cycle Exercises I Problem 1: Worksheet d) Juniper paid $300,000 in dividends, and raised $1,150,000 via issuances of additional shares of stock. Download free ebooks at bookboon.com 7 Accounting Cycle Exercises I Problem 1: Solution Solution 1 Dec. 31, 20X8 Dec. 31, 20X9 Total Assets $2,500,000 $3,800,000 Total Liabilities 900,000 1,300,000 Total Equity $ 1,600,000 $ 2,500,000 Ending Equity $ 2,500,000 Beginning Equity 1,600,000 Change in Equity $ 900,000 a) Juniper paid no dividends, and no additional capital was raised via share issuances. Because there were no dividends and no issues of stock, the $900,000 increase in equity is all attributable to net income. $1,600,000 + $0 for stock issuances - $0 for dividends + net income ($900,000) = $2,500,000 b) Juniper paid $300,000 in dividends, and no additional capital was raised via share issuances. Because there were $300,000 in dividends and no issues of stock, the $900,000 increase in equity would require a $1,200,000 net income. $1,600,000 + $0 for stock issuances - $300,000 for dividends + net income ($1,200,000) = $2,500,000 c) Juniper paid no dividends, but raised $1,500,000 via issuances of additional shares of stock. Because there were no dividends, but $1,500,000 of stock issuances, Juniper had a net loss of $600,000. $1,600,000 + $1,500,000 for stock issuances - $0 for dividends + net income (-$600,000) = $2,500,000 d) J uniper paid $300,000 in dividends, and raised $1,150,000 via issuances of additional shares of stock. Because there were $300,000 in dividends, and $1,150,000 of stock issuances, Juniper had a net income of $50,000. $1,600,000 + $1,150,000 for stock - $300,000 for dividends + net income ($50,000) = $2,500,000 Download free ebooks at bookboon.com 8 Accounting Cycle Exercises I Problem 2 Problem 2 TOP Corporation was formed at the beginning of 20X2, and presents the following incomplete financial statements for three years. TOP has requested your help in completing the missing values for each year. Hint: Begin by solving the unknowns in the 20X2 year, and work forward to subsquent years. Remember that 20X2 is the first year of business, so TOP begins with a zero balance in 20X2 beginning retained earnings. TOP CORPORATION Income Statement For the Years Ending December 31, 20XX 20X4 20X3 20X2 Revenues Services to customers $ 100,000 ? $ 50,000 Expenses Wages ? $ 58,500 ? Interest 1,500 ? 1,500 ? 2,500 ? Net income ? $ 20,000 ? TOP CORPORATION Statement of Retained Earnings For the Years Ending December 31, 20XX 20X4 20X3 20X2 Beginning retained earnings ? ? $ - Plus: Net income ? 20,000 ? ? ? $ 12,500 Less: Dividends 15,000 ? ? Ending retained earnings $ 30,000 ? ? Download free ebooks at bookboon.com 9 Accounting Cycle Exercises I Problem 2: Worksheet TOP CORPORATION Balance Sheet December 31, 20XX 20X4 20X3 20X2 Assets Cash ? ? $ 25,000 Accounts receivable 32,500 25,000 ? Land 90,000 90,000 90,000 Total assets ? $ 144,500 ? Liabilities Interest payable ? $ 500 $ 1,000 Loan payable 5,000 ? ? Total liabilities $ 5,500 $ 15,500 Stockholders’ equity Capital stock ? ? $114,000 Retained earnings ? 15,000 ? Total stockholders’ ? ? 119,000 equity Total Liabilities and $ 149,500 ? $ 150,000 equity Worksheet 2 TOP CORPORATION Income Statement For the Years Ending December 31, 20XX 20X4 20X3 20X2 Revenues Services to customers $ 100,000 ? $ 50,000 Expenses Wages ? $ 58,500 ? Interest 1,500 ? 1,500 ? 2,500 ? Net income ? $ 20,000 ? Download free ebooks at bookboon.com 10 Accounting Cycle Exercises I Problem 2: Worksheet TOP CORPORATION Statement of Retained Earnings For the Years Ending December 31, 20XX 20X4 20X3 20X2 Beginning retained earnings ? ? $ - Plus: Net income ? 20,000 ? ? ? $ 12,500 Less: Dividends 15,000 ? ? Ending retained earnings $ 30,000 ? ? TOP CORPORATION Balance Sheet December 31, 20XX 20X4 20X3 20X2 Assets Cash ? ? $ 25,000 Accounts receivable 32,500 25,000 ? Land 90,000 90,000 90,000 Total assets ? $ 144,500 ? Liabilities Interest payable ? $ 500 $ 1,000 Loan payable 5,000 ? ? Total liabilities $ 5,500 $ 15,500 ? Stockholders’ equity Capital stock ? ? $114,000 Retained earnings ? 15,000 ? Total stockholders’ ? ? 119,000 equity Total Liabilities and $ 149,500 ? $ 150,000 equity Download free ebooks at bookboon.com 11  Accounting Cycle Exercises I Problem 2: Solution Solution 2 TOP CORPORATION Income Statement For the Years Ending December 31, 20XX 20X4 20X3 20X2 Revenues Services to customers $ 100,000 $ 80,000 $ 50,000 Expenses Wages $ 68,500 $ 58,500 35,000 Interest 1,500 70,000 1,500 60,000 2,500 37,500 Net income $ 30,000 $ 20,000 $ 12,500 Please click the advert Download free ebooks at bookboon.com 12 Accounting Cycle Exercises I Problem 2: Solution TOP CORPORATION Statement of Retained Earnings For the Years Ending December 31, 20XX 20X4 20X3 20X2 Beginning retained earnings $ 15,000 $ 5,000 $ - Plus: Net income 30,000 20,000 $ 12,500 $ 45,000 $ 25,000 $ 12,500 Less: Dividends 15,000 10,000 7,500 Ending retained earnings $ 30,000 $ 15,000 $ 5,000 TOP CORPORATION Balance Sheet December 31, 20XX 20X4 20X3 20X2 Assets Cash $ 27,000 $ 29,500 $ 25,000 Accounts receivable 32,500 25,000 35,000 Land 90,000 90,000 90,000 Total assets $ 149,500 $ 144,500 $ 150,000 Liabilities Interest payable $ 500 $ 500 $ 1,000 Loan payable 5,000 15,000 30,000 Total liabilities $ 5,500 $ 15,500 $ 31,000 Stockholders’ equity Capital stock $114,000 $114,000 $114,000 Retained earnings 30,000 15,000 5,000 Total stockholders’ 144,000 129,000 119,000 equity Total Liabilities and $ 149,500 $ 144,500 $ 150,000 equity Download free ebooks at bookboon.com 13 Accounting Cycle Exercises I Problem 3: Worksheet Problem 3 Prepare Bologna’s income statement, statement of retained earnings, and balance sheet for the year ending December 31, 20X5. The following information is all that is available. Be sure to prepare proper headings and dates on each financial statement. Capital stock $102,500 Wage expense 92,500 Revenue 225,000 Cash 22,500 Utilities expense 15,000 Beginning retained earnings 27,500 Rent expense 25,000 Accounts payable 10,000 Equipment 200,000 Dividends 12,500 Accounts receivable 47,500 Notes payable 50,000 Worksheet 3 BOLOGNA COMPANY Income Statement Revenues Services to customers Expenses BOLOGNA COMPANY Ending retained earnings Download free ebooks at bookboon.com 14  Accounting Cycle Exercises I Problem 3: Worksheet Assets Total assets Liabilities Total liabilities Stockholders’ equity Total stockholders’ equity Total liabilities and equity your chance to change the world Please click the advert Here at Ericsson we have a deep rooted belief that the innovations we make on a daily basis can have a profound effect on making the world a better place for people, business and society. Join us. 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To apply and for all current job openings please visit our web page: www.ericsson.com/careers Download free ebooks at bookboon.com 15 Accounting Cycle Exercises I Problem 3: Solution Solution 3 BOLOGNA COMPANY Income Statement For the Year Ending December 31, 20X5 Revenues Services to customers $ 225,000 Expenses Wages $ 92,500 Utilities $ 15,000 Rent $ 25,000 $ 132,500 Net income $ 92,500 BOLOGNA COMPANY Statement of Retained Earnings For the Year Ending December 31, 20X5 Beginning retained earnings $ 27,500 Plus: Net income $ 92,500 $ 120,000 Less: Dividends $ 12,500 Ending retained earnings $ 107,500 BOLOGNA COMPANY Balance Sheet December 31, 20X5 Assets Cash $ 22,500 Accounts receivable $ 47,500 Equipment $ 200,000 Total assets $ 270,000 Liabilities Accounts payable $ 10,000 Notes payable $ 50,000 Total liabilities $ 60,000 Stockholders’ equity Capital stock $ 102,500 Retained earnings $ 107,500 Total stockholders’ equity $ 210,000 Total liabilities and equity $ 270,000 Download free ebooks at bookboon.com 16 Accounting Cycle Exercises I Problem 4: Worksheet Problem 4 Scream Clean Company provided the following very limited set of data. Use this information to determine net income for the years ending December 31, 20X6, 20X7, 20X8, and 20X9. The company was formed at the beginning of January, 20X6 by issuing $350,000 of capital stock. No additional shares were issued during the 4-year period. The company’s 20X9 dividends were equal to 50% of the 20X9 net income. Revenues, 20X7 $315,000 Dividends, 20X8 52,500 Total equity, December 31, 20X8 735,000 Total liabilities, December 31, 20X8 770,000 Retained earnings, December 31, 20X6 143,500 Expenses, 20X7 154,000 Retained earnings, December 31, 20X7 280,000 Dividends, 20X8 35,000 Total assets, December 31, 20X9 1,750,000 Increase in liabilities, 20X9 175,000 Worksheet 4 20X6 20X7 20X8 20X9 Download free ebooks at bookboon.com 17 Accounting Cycle Exercises I Problem 4: Solution Solution 4 20X6 Retained earnings, December 31, 20X6 $ 143,500 Plus: Dividends paid during 20X6 35,000 Net income for the year ending December 31, 20X6 $ 178,500 20X7 Revenues for the year ending December 31, 20X7 $ 315,000 Less: Expenses for the year ending December 31, 20X7 154,000 Net income for the year ending December 31, 20X7 $ 161,000 20X8 Total equity, December 31, 20X8 $ 735,000 Less: Capital stock 350,000 Retained earnings, December 31, 20X8 $ 385,000 Less: Retained earnings, December 31, 20X7 280,000 Increase in reatined earnings during 20X8 $ 105,000 Plus: Dividends paid during 20X7 52,500 Net income for the year ending December 31, 20X8 $ 157,500 20X9 Total liabilities, December 31, 20X8 $ 770,000 Plus: Increase in liabilities during 20X9 175,000 Total liabilities, December 31, 20X9 $ 945,000 $ - Total assets, December 31, 20X9 $ 1,750,000 Less: Total liabilities, December 31, 20X9 945,000 Total equity, December 31, 20X9 $ 805,000 Less: Capital stock 350,000 Retained earnings, December 31, 20X9 $ 455,000 Less: Retained earnings, December 31, 20X8 385,000 Increase in retained earnings during 20X9 $ 70,000 The 20X9 net income was $140,000 Proof: Dividends = Net Income X 50% Increase in Retained Earnings = Net Income - Dividends thus: $70,000 = Net income - (Net income X 50%) $70,000 = 0.5 X Net Income Net Income = $140,000 Download free ebooks at bookboon.com 18  Accounting Cycle Exercises I Problem 5 Problem 5 Rajagopul Corporation is a newly formed company. Below are the first 10 transactions that Rajagopul encountered. Prepare an income statement, statement of retained earnings, and balance sheet immediately following each of these consecutive transactions. 1) Issued capital stock for $100,000 cash. 2) Purchased building for $240,000, making a $40,000 down payment and signing a promissory note payable for the balance. 3) Paid wages expense of $10,000. 4) Provided services to customers for $30,000 cash. 5) Paid utilities expense of $4,000. 6) Reduced note payable with an $16,000 cash payment (ignore interest costs). 7) Provided services to customers on account, $20,000. 8) Incurred wages expense of $6,000, to be paid in the future. 9) Collected $8,000 on an outstanding account receivable. 10) Declared and paid dividend of $12,000. what‘s missing in this equation? Please click the advert You could be one of our future talents MAERSK INTERNATIONAL TECHNOLOGY & SCIENCE PROGRAMME Are you about to graduate as an engineer or geoscientist? 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Moller - Maersk. www.maersk.com/mitas Download free ebooks at bookboon.com 19 Accounting Cycle Exercises I Problem 5: Worksheet Worksheet 5 RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #1) Revenues Services to customers $ - Expenses Wages $ - Utilities - - Net income $ - RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #1) Beginning retained earnings $ - Plus: Net income - $ - Less: Dividends - Ending retained earnings $ - RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #1 Assets Cash $ - Accounts receivable - Building - Total assets $ - Liabilities Wages payable $ - Notes payable - Total liabilities $ - Stockholders’ equity Capital stock $ - Retained earnings - Total stockholders’ equity - Total liabilities and equity $ - Download free ebooks at bookboon.com 20 Accounting Cycle Exercises I Problem 5: Worksheet RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #2) Revenues Services to customers $ - Expenses Wages $ - Utilities - - Net income $ - RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #2) Beginning retained earnings $ - Plus: Net income - $ - Less: Dividends - Ending retained earnings $ - RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #2 Assets Cash $ - Accounts receivable - Building - Total assets $ - Liabilities Wages payable $ - Notes payable - Total liabilities $ - Stockholders’ equity Capital stock $ - Retained earnings - Total stockholders’ equity - Total liabilities and equity $ - Download free ebooks at bookboon.com 21  Accounting Cycle Exercises I Problem 5: Worksheet RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #3) Revenues Services to customers $ - Expenses Wages $ - Utilities - - Net income $ - RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #3) Beginning retained earnings $ - Plus: Net income - $ - Less: Dividends - Ending retained earnings $ - Turning a challenge into a learning curve. 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Visit accenture.com/bootcamp Download free ebooks at bookboon.com 22 Accounting Cycle Exercises I Problem 5: Worksheet RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #3 Assets Cash $ - Accounts receivable - Building - Total assets $ - Liabilities Wages payable $ - Notes payable - Total liabilities $ - Stockholders’ equity Capital stock $ - Retained earnings - Total stockholders’ equity - Total liabilities and equity $ - RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #4) Revenues Services to customers $ - Expenses Wages $ - Utilities - - Net income $ - RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #4) Beginning retained earnings $ - Plus: Net income - $ - Less: Dividends - Ending retained earnings $ - Download free ebooks at bookboon.com 23 Accounting Cycle Exercises I Problem 5: Worksheet RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #4 Assets Cash $ - Accounts receivable - Building - Total assets $ - Liabilities Wages payable $ - Notes payable - Total liabilities $ - Stockholders’ equity Capital stock $ - Retained earnings - Total stockholders’ equity - Total liabilities and equity $ - RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #5) Revenues Services to customers $ - Expenses Wages $ - Utilities - - Net income $ - RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #5) Beginning retained earnings $ - Plus: Net income - $ - Less: Dividends - Ending retained earnings $ - Download free ebooks at bookboon.com 24  Accounting Cycle Exercises I Problem 5: Worksheet RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #5 Assets Cash $ - Accounts receivable - Building - Total assets $ - Liabilities Wages payable $ - Notes payable - Total liabilities $ - Stockholders’ equity Capital stock $ - Retained earnings - Total stockholders’ equity - Total liabilities and equity $ -




 
 
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Find your next challenge at Are you among the best qualified in finance, economics, IT or mathematics? www.simcorp.com/careers www.simcorp.com MITIGATE RISK REDUCE COST ENABLE GROWTH Download free ebooks at bookboon.com 31 Accounting Cycle Exercises I Problem 5: Solution Solution 5 RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #1) Revenues Services to customers $ - Expenses Wages $ - Utilities - - Net income $ - RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #1) Beginning retained earnings $ - Plus: Net income - $ - Less: Dividends - Ending retained earnings $ - RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #1 Assets Cash $ 100,000 Cash increases Accounts receivable - $ 100.000 Building - Total assets $ 100,000 Liabilities Wages payable $ - Notes payable - Total liabilities $ - Stockholders’ equity Capital stock $ 100,000 Capital stock Retained earnings - increases $ 100.000 Total stockholders’ equity 100,000 Total liabilities and equity $ 100,000 Download free ebooks at bookboon.com 32 Accounting Cycle Exercises I Problem 5: Solution RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #2) Revenues Services to customers $ - Expenses Wages $ - Utilities - - Net income $ - RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #2) Beginning retained earnings $ - Plus: Net income - $ - Less: Dividends - Ending retained earnings $ - RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #2 Assets Cash $ 60,000 Cash increases Accounts receivable - $ 40.000 Building 240,000 Building stock Total assets $ 300,000 increases $ 240.000 Liabilities Wages payable $ - Notes payable 200,000 Notes payable Total liabilities $ 200,000 increases $ 200.000 Stockholders’ equity Capital stock $ 100,000 Retained earnings - Total stockholders’ equity 100,000 Total liabilities and equity $ 300,000 Download free ebooks at bookboon.com 33  Accounting Cycle Exercises I Problem 5: Solution RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #3) Revenues Services to customers $ - Expenses Wages $ 100,000 Wages Expense Utilities - 10,000 increases $ 10.000 Net income $ (10,000) RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #3) Beginning retained earnings $ - Plus: Net income (10,000) $ (10,000) Less: Dividends - Ending retained earnings $ (10,000) Please click the advert Download free ebooks at bookboon.com 34 Accounting Cycle Exercises I Problem 5: Solution RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #3 Assets Cash $ 50,000 Cash decreases Accounts receivable - $ 10.000 Building 240,000 Total assets $ 290,000 Liabilities Wages payable $ - Notes payable 200,000 Total liabilities $ 200,000 Stockholders’ equity Capital stock $ 100,000 Retained earnings (10,000) Total stockholders’ equity 90,000 Total liabilities and equity $ 290,000 RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #4) Revenues Services to customers $ 30,000 Revenue inreases Expenses $ 30.000 Wages $ 10,000 Utilities - 10,000 Net income $ 20,000 RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #4) Beginning retained earnings $ - Plus: Net income 20,000 $ 20,000 Less: Dividends - Ending retained earnings $ 20,000 Download free ebooks at bookboon.com 35 Accounting Cycle Exercises I Problem 5: Solution RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #4 Assets Cash $ 80,000 Cash inreases Accounts receivable - $ 30.000 Building 240,000 Total assets $ 320,000 Liabilities Wages payable $ - Notes payable 200,000 Total liabilities $ 200,000 Stockholders’ equity Capital stock $ 100,000 Retained earnings 20,000 Total stockholders’ equity 120,000 Total liabilities and equity $ 320,000 RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #5) Revenues Services to customers $ 30,000 Expenses Wages $ 10,000 Utilities 4,000 14,000 Utilities Expense Net income $ 16,000 increases $ 4.000 RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #5) Beginning retained earnings $ - Plus: Net income 16,000 $ 16,000 Less: Dividends - Ending retained earnings $ 16,000 Download free ebooks at bookboon.com 36  Accounting Cycle Exercises I Problem 5: Worksheet RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #5 Assets Cash $ 76,000 Cash decreases Accounts receivable - $ 4.000 Building 240,000 Total assets $ 316,000 Liabilities Wages payable $ - Notes payable 200,000 Total liabilities $ 200,000 Stockholders’ equity Capital stock $ 100,000 Retained earnings 16,000 Total stockholders’ equity 116,000 Total liabilities and equity $ 316,000 Try this... 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Try more www.alloptions.nl/life Download free ebooks at bookboon.com 37 Accounting Cycle Exercises I Problem 5: Solution RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #6) Revenues Services to customers $ 30,000 Expenses Wages $ 10,000 Utilities 4,000 14,000 Net income $ 16,000 RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #6) Beginning retained earnings $ - Plus: Net income 16,000 $ 16,000 Less: Dividends - Ending retained earnings $ 16,000 RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #6 Assets Cash $ 60,000 Cash decreases Accounts receivable - $ 16.000 Building 240,000 Total assets $ 300,000 Liabilities Wages payable $ - Notes payable 184,000 Notes payable Total liabilities $ 184,000 decreases $ 16.000 Stockholders’ equity Capital stock $ 100,000 Retained earnings 16,000 Total stockholders’ equity 116,000 Total liabilities and equity $ 300,000 Download free ebooks at bookboon.com 38 Accounting Cycle Exercises I Problem 5: Solution RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #7) Revenues Services to customers $ 50,000 Revenue Expenses increases $ 20.000 Wages $ 10,000 Utilities 4,000 14,000 Net income $ 36,000 RAJAGOPUL CORPORATION Statement of Retained Earnings For the Month (through transaction #7) Beginning retained earnings $ - Plus: Net income 36,000 $ 36,000 Less: Dividends - Ending retained earnings $ 36,000 RAJAGOPUL CORPORATION Balance Sheet As of Completion of Transaction #7 Assets Cash $ 60,000 Accounts receivable 20,000 Accounts Building 240,000 receivable increases Total assets $ 320,000 $ 20.000 Liabilities Wages payable $ - Notes payable 184,000 Total liabilities $ 184,000 Stockholders’ equity Capital stock $ 100,000 Retained earnings 36,000 Total stockholders’ equity 136,000 Total liabilities and equity $ 320,000 Download free ebooks at bookboon.com 39  Accounting Cycle Exercises I Problem 5: Solution RAJAGOPUL CORPORATION Income Statement For the Month (through transaction #8) Revenues Services to customers $ 50,000 Expenses