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Answer:
111) Parker Pool Supply, Inc. reported the following items for the year ended December 31,
2019:
Wages and salary expense
$527,000
Cost of goods sold
1,124,000
Rent expense
395,000
Sales revenue
2,564,000
Interest expense
30,000
Income tax expense
121,000
Accounts receivable
27,000
Prepare an income statement for the year ended December 31, 2019.
Cost of goods sold
Wages and salary expense
Rent expense
Interest expense
Pretax income
Income tax expense
Net income
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112) National Shops, Inc. reported the following amounts on its balance sheet as of December
31, 2019:
Inventory
$325,000
Notes payable
100,000
Cash
150,000
Common stock
750,000
Net property, plant and equipment
600,000
Accounts receivable
30,000
Accounts payable
45,000
Retained earnings
?
Prepare an income statement for the year ended December 31, 2019.
Accounts receivable
Inventory
Property, plant, and equipment
Notes payable
Stockholders’ equity
Common stock
Retained earnings
equity
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113) During 2019, Winterset Company performed services for which customers paid or
promised to pay a total of $587,000. Of this amount, $552,000 had been collected by year-end.
Winterset paid $340,000 in cash for employee wages and owed the employees $15,000 at the end
of the year for work that had been done but had not paid for. Winterset paid interest expense of
$3,000 and $195,000 for other service expenses. The income tax rate was 35%, and income taxes
had not yet been paid at the end of the year. Winterset declared and paid dividends of $20,000.
There were no other transactions that affected cash.
1. What was the amount of the increase or decrease in cash during the year?
2. Prepare an income statement for Winterset for the year 2019.
3. At the beginning of 2019, Winterset’s retained earnings were $90,000. Prepare a statement of
stockholders’ equity with only a column for retained earnings.
Answer:
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114) Alfred Company manufactures men’s clothing. During 2019, the company reported the
following items that affected cash. Indicate whether each of these items is a cash flow from
operating activities (O), investing activities (I), or financing activities (F).
Purchased equipment by paying cash:
___
Collected cash on account from customers:
___
Paid dividends to stockholders:
___
Paid cash for supplies:
___
Paid suppliers for fabric:
___
Borrowed money from bank on a note
payable:
___
Paid interest to bank on the note payable:
___
Paid wages to employees:
___
Sold shares of common stock to new
stockholders:
___
Purchased equipment by paying cash:
Collected cash on account from customers:
Paid dividends to stockholders:
Paid cash for supplies:
Paid suppliers for fabric:
Borrowed money from bank on a note payable:
Paid interest to bank on the note payable:
Paid wages to employees:
Sold shares of common stock to new
stockholders:
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115) Fulton Company was established at the beginning of 2019 when several investors paid a
total of $200,000 to purchase Fulton common stock. No additional investments in common stock
were made during the year. By December 31, 2019, Fulton had cash on hand of $45,000, office
equipment of $40,000, inventory of $156,000, and accounts payable of $10,000. Sales for the
year were $812,000. Of this amount, customers still owed $20,000. Fulton declared and paid
dividends of $25,000 to its stockholders during 2019.
1. Based on the information above, prepare a balance sheet for Fulton Company at December 31,
2019. In the process of preparing the balance sheet, you must calculate the ending balance in
retained earnings.
2. Prepare a statement of stockholders’ equity for the year ended December 31, 2019.
3. What was the amount of Fulton’s net income for 2019?
4. Was Fulton successful during its first year in operation? Explain your answer.
Answer:
68
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116) For Glad Rags Shops, the following information is available for the year ended December
31, 2019:
Sales revenue
$4,200,000
Cost of goods sold
2,650,000
Salaries expense
500,000
Rent expense
300,000
Administrative expense
250,000
Dividends declared $10,000
The income tax expense is $150,000.
Prepare an income statement for Glad Rags Shops.
Sales revenue
$4,200,000
$4,200,000
Cost of goods sold
Salaries expense
Rent expense
Administrative expense
taxes
Less income tax expense
Net income
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117) Baseline Corporation was formed two years ago to manufacture fitness equipment. It has
been profitable and is growing rapidly. It currently has 150 stockholders and 90 employees; most
of the employees own at least a few shares of Baseline’s common stock. The company has
received financing from two banks. It will sell additional shares of common stock within the next
three months and will also seek additional loans and hire new employees to support its continued
growth.
1. Explain who relies on the information in financial statements prepared by Baseline
Corporation.
2. Why is compliance with generally accepted accounting principles and accuracy in accounting
important for Baseline?
Answer:
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118) A new accountant who prepared the financial statements for Saltech Company at the end of
its first year of operations made several errors. For each of the following items, indicate whether
the income statement and balance sheet are affected by the error, and also the amount by which
the respective financial statement is affected. (For example, an error might cause revenues and
net income on the income statement and retained earnings and accounts receivable and assets on
the balance sheet to be overstated by x dollars). Ignore the effects of income taxes.
Items to determine which financial statement is affected, the error amount, and whether the
account is overstated or understated:
a. The company had sales for cash of $3,000,000. It also had sales on account of $1,800,000 that
had been collected by the end of the year, and sales on account of $200,000 that are expected to
be collected early the following year. The accountant reported total sales revenue of $4,800,000.
b. The company had total inventories of $600,000 at the end of the year. Of this amount,
inventory reported at $30,000 was obsolete and will have to be scrapped. The balance sheet
prepared by the accountant showed total inventories of $600,000.
c. The company has a bank loan for which interest expense during the year of $10,000 will be
paid early in January of the next year. The accountant recorded neither the interest expense nor
the interest payable.
d. An insurance policy was listed as an asset of $6,000 at the beginning of the year. The entire
amount of the policy was for the current year and the policy has expired. The accountant took no
action to recognize the expiration of the policy.
Answer:
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119) Larson Company ends its recent year of operations with $3,500,000 in retained earnings.
During the year Larson’s net income exceeded its dividend declarations by $200,000. Larson’s
dividend declarations were $25,000 greater than the dividend payments.
How much was Larson Company’s beginning retained earnings?
120) As of January 1, 2019, a corporation had assets of $340,000 and liabilities of $120,000.
During 2019, assets increased $45,000 and liabilities increased $15,000.
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121) Laker Company has provided the following information for its most recent year of
operation:
Cash collected from customers totaled $99,300.
Cash borrowed from banks totaled $42,700.
Cash paid to employees totaled $23,300.
Cash paid for rent totaled $3,100.
Cash received from selling an investment in Husky stock totaled $73,000.
Cash payments to banks for repayment of money borrowed totaled $9,700.
Cash paid for operating expenses totaled $11,200.
Land costing $75,000 was sold for $75,000 cash.
Cash paid for dividend payments to stockholders totaled $7,700.
Calculate Laker’s net cash flow from financing activities.
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122) Laker Company has provided the following information for its most recent year of
operation:
Cash collected from customers totaled $99,300.
Cash borrowed from banks totaled $42,700.
Cash paid to employees totaled $23,300.
Cash paid for rent totaled $3,100.
Cash received from selling an investment in Husky stock totaled $73,000.
Cash payments to banks for repayment of money borrowed totaled $9,700.
Cash paid for operating expenses totaled $11,200.
Land costing $75,000 was sold for $75,000 cash.
Cash paid for dividend payments to stockholders totaled $7,700.
Calculate Laker’s net cash flow from investing activities.
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123) Laker Company has provided the following information for its most recent year of
operation:
Cash collected from customers totaled $99,300.
Cash borrowed from banks totaled $42,700.
Cash paid to employees totaled $23,300.
Cash paid for rent totaled $3,100.
Cash received from selling an investment in Husky stock totaled $73,000.
Cash payments to banks for repayment of money borrowed totaled $9,700.
Cash paid for operating expenses totaled $11,200.
Land costing $75,000 was sold for $75,000 cash.
Cash paid for dividend payments to stockholders totaled $7,700.
Calculate Laker’s net cash flow from operating activities.
124) During 2019, Rock Company’s cash balance increased from $57,000 to $94,300. Rock’s net
cash flow from operating activities was $26,900 and its net cash flow from financing activities
was $13,700.
Calculate Rock’s net cash flow from investing activities.
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125) Moss Company has provided the following data:
2019 revenues were $87,500.
2019 expenses were $43,900.
Dividends declared and paid by Moss during 2019 totaled $15,700.
Total assets on December 31, 2019 were $227,000.
Total stockholders’ equity on December 31, 2019 was $133,000.
Common stock on December 31, 2019 was $93,000.
Calculate the beginning retained earnings balance.
126) Describe the roles of the Securities and Exchange Commission and The Financial
Accounting Standards Board with respect to the development of Generally Accepted Accounting
Principles.
77
127) Describe the elements of the balance sheet equation.
128) Describe the role of a company’s management and the external auditors in the accounting
communication process.
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129) What is the objective of the cash flow statement? Describe the three cash flow
classifications that are reported within the cash flow statement.
130) How is net income in the income statement different from the cash flow from operating
activities in the cash flow statement?