Basic Accounting Concepts ♦ 93
Assets = Liabilities + Stockholders’ Equity
Cash
Supplies
Equipment
Notes
Payable
Capital
Stock
Retained
Earnings
Type of Retained
Earnings
Transaction
Part B
Using the information from Part A, prepare (1) an income statement, (2) a statement of retained
earnings, (3) a balance sheet, and (4) a statement of cash flows.
Mac’s Mobile Wash, Inc.
Income Statement
94 ♦ Chapter 2
Mac’s Mobile Wash, Inc.
Statement of Retained Earnings
Mac’s Mobile Wash, Inc.
Balance Sheet
Basic Accounting Concepts ♦ 95
Mac’s Mobile Wash, Inc.
Statement of Cash Flows
Part C
Use the ending balances from Part B. Now, assume it is the next month (month two) for Mac’s
Mobile Wash, Inc. Following are the transactions for October. Record these transactions in the
accounting equation provided.
Oct.
1
Paid $1,000 on the note payable (assume that there is no interest charge).
2
Received $2,000 cash for services (washes)
5
Purchased additional supplies of $1,500 (the supplies from September have not been used up)
10
Received $500 cash for services (washes)
15
Paid employees for hours worked during the first two weeks of October, $1,500.
18
Received $2,000 cash for services (washes).
20
Issued an additional $10,000 capital stock for cash.
31
Services (washes) provided the second half of September totaled $10,500 cash.
31
Received and paid the water bill $950.
31
Paid this month’s rent for business space in U-STOR-IT, $1,000
31
Paid employees for hours worked during the last two weeks of October, $1,500.
96 ♦ Chapter 2
Assets = Liabilities + Stockholders’ Equity
Cash
Supplies
Equipment
Notes
Payable
Capital
Stock
Retained
Earnings
Type of Retained
Earnings
Transaction
Beg. Bal.
46,050
3,000
26,200
12,000
50,000
13,250
Part D
Using the completed accounting equation from Part C, prepare (1) an income statement, (2) a
statement of retained earnings, (3) a balance sheet, and (4) a statement of cash flows.
Mac’s Mobile Wash, Inc.
Income Statement
Basic Accounting Concepts ♦ 97
Mac’s Mobile Wash, Inc.
Statement of Retained Earnings
Mac’s Mobile Wash, Inc.
Balance Sheet
98 ♦ Chapter 2
Mac’s Mobile Wash, Inc.
Statement of Cash Flows
Basic Accounting Concepts ♦ 99
100 ♦ Chapter 2
Basic Accounting Concepts ♦ 101
102 ♦ Chapter 2
8. WillSell Realty Corporation had the following balance sheet amounts. Place these amounts into
the appropriate spots in the accounting equation provided and determine the balance of Building.
Accounts Payable
$ 6,000
Accounts Receivable
1,000
Building
?
Cash
3,000
Capital Stock
$19,000
Equipment
6,000
Land
8,000
Retained Earnings
2,000
Assets = Liabilities + Stockholders’ Equity
Cash
Accounts
Receivable
Building
Land
Equipment
Accounts
Payable
Capital
Stock
Retained Earnings
9. The following are included in Ace Auto Parts, Inc.’s December 31, 2006 balance sheet:
Accounts Receivable
$ 50,000
Building
100,000
Cash
60,000
Land
130,000
Accounts Payable
40,000
Notes Payable
70,000
Stockholders’ Equity
?
Below are the balances for December 31, 2007
Accounts Receivable
$ 75,000
Building
100,000
Cash
150,000
Land
130,000
Accounts Payable
60,000
Notes Payable
50,000
Stockholders’ Equity
?
Analyze the changes in these balances and determine net income for 2005, assuming that the only
change to stockholders’ equity is from net income.
Assets = Liabilities + Stockholders’ Equity
Basic Accounting Concepts ♦ 103