Reference no: EM13834547

Module 1

Question 1:

Webster Consulting experienced the following transactions for 2012, its first year of operations, and 2013. Assume that all transactions involve the receipt or payment of cash.

Transactions for 2012

1. Acquired $20,000 by assuming common stock.
2. Received $35,000 cash for providing services to customers.
3. Borrowed $25,000 cash from creditors.
4. Paid expenses amounting to $22,000
5. Purchased land for $30,000 cash.

Transactions for 2013

Beginning account balances for 2013 are:

Cash                            $28,000

Land                            30,000

Notes Payable             25,000

Common Stock           20,000

Retained Earnings       13,000

1. Acquired an additional $24,000 from the issue of common stock.
2. Received $95,000 for providing services
3. Paid $15,000 to creditors to reduce loan.
4. Paid expenses amounting to $71,500.
5. Paid $3,000 dividend to the stockholders.
6. Determined that the market value of the land is $47,000.

Required

1. Write an accounting equation, and record the effects of each accounting event under the appropriate headings for each year.  Record the amounts of revenue, expense, and dividends in the Retained Earnings column.  Provide appropriate titles for these accounts in the last column of the table.
2. Prepare an income statement, statement of changes in stockholders' equity, year end balance sheet, and statement of cash flows for each year.
3. Determine the amount of cash that is in the retained earnings account at the end of 2012 and 2013.
4. Examine the balance sheets for the two years.  How did assets change from 2012 to 2013?
5. Determine the balance in the Retained Earnings account immediately after Event 2 in 2012 and 2013 are recorded.

 

Question 2:

Identifying and arranging elements on financial statements

The following information was drawn from the records of Paso & Associates as December 31, 2013.

 

Supplies                                             $2,500	Unearned revenue                             $5,400
Consulting revenue                         120,000	Notes payable                                    40,000
Land                                                  70,000	Salaries payable                                   9,000
Dividends                                          10,000	Salary expense                                   58,000
Cash flow from fin. Activities           30,000	Common stock issued                       30,000
Interest revenue                                   6,000	Beginning common stock                  40,000
Ending retained earnings                   50,100	Accounts receivable                          32,000
Cash                                                   66,000	Cash flow from inv. Activities       (21,000)
Interest payable                                   4,000	Cash flow form oper. Activities        18,000
Interest expense                                   9,000	Prepaid rent                                         8,000

 

Required

 Use the preceding information to construct an income statement, statement of changes in stock-holders equity, balance sheet, and statement of cash flows. (Show only totals on the statement of cash flows.)