Problem 1-7B (Continued)
Part 3
Niko’s Maintenance Co.
Income Statement
For Month Ended June 30
Revenues
Maintenance services revenue..…….. $16,925
Expenses
Rent expense………………………………… $6,000
Salaries expense…………………………... 1,600
Advertising expense…………………..…. 1,150
Utilities expense……………………………. 890
Niko’s Maintenance Co.
Statement of Owner’s Equity
For Month Ended June 30
N. Niko, Capital, June 1……………..….…….….….. $ 0
Add: Investment by owner……………………….. 130,000
Niko’s Maintenance Co.
Balance Sheet
June 30
Assets Liabilities
Cash………….….…….….……$130,060 Accounts payable..…….….…….…...$ 0
Accounts receivable........ 675 Equity
Problem 1-7B (Concluded)
Part 3—continued
Niko’s Maintenance Co.
Statement of Cash Flows
For Month Ended June 30
Cash flows from operating activities
Cash paid for utilities……………………………………….….. (890)
Cash paid to employees…………………..….…….….…….. (1,600)
Net cash provided by operating activities.….….…..... $ 6,460
Cash flows from investing activities
Purchase of equipment………………………………………... (2,400)
Net cash used by investing activities..…….…............ (2,400)
Cash flows from financing activities
1$850 + $7,500 + $7,900 = $16,250
Problem 1-8B (60 minutes) Parts 1 and 2
Assets =Liabilities +Equity
Cash +Accounts
Receivable +Office
Supplies +Office
Equipment +Building =Accounts
Payable +Notes
Payable +N. Nadal,
Capital –
N. Nadal,
With-
drawals
+Reve-
nues –Expen-
ses
a. + $90,000 + $10,000 + $100,000
b. – 40,000 + $150,000 + $110,000
Bal. 50,000 + 10,000 + 150,000 = 110,000 + 100,000
c. – 25,000 + 25,000
Bal. 25,000 + 35,000 + 150,000 = 110,000 + 100,000
d. + $1,200 + 1,700 + $2,900
Bal. 18,550 + 1,000 + 1,200 + 36,700 + 150,000 =2,900 + 110,000 + 100,000 –11,500 + 6,800 –750
j. – 700 – 700
Bal. 17,850 + 1,000 + 1,200 + 36,700 + 150,000 =2,200 + 110,000 + 100,000 –11,500 + 6,800 –750
k. – 2,500 –2,500
Bal. $15,350 + $1,000 + $1,200 + $36,700 + $150,000 =$2,200 + $110,000 + $100,000 –$11,500 + $6,800 –$3,250
Problem 1-8B (Concluded)
Part 3
The company’s net income = $6,800 – $3,250 = $3,550
Problem 1-9B (60 minutes) Parts 1 and 2
Assets = Liabilities + Equity
Date Cash +Accounts
Receivable +Office
Supplies +Office
Equipment +Roofing
Equipment =Accounts
Payable +R. Rivera,
Capital –
R. Rivera,
With-
drawals
+Reve-
nues –Expen-
ses
July 1 + $80,000 = + $80,000
2– 700 –$700
Bal. 79,300 = 80,000 –700
3– 1,000 + $5,000 + $4,000
Bal. 78,300 + 5,000 = 4,000 + 80,000 –700
6– 600 + $ 600
Bal. 77,700 + 600 + 5,000 = 4,000 + 80,000 –700
8 + 7,600 + $7,600
25 + 5,000 + 5,000
Bal. 83,000 + 13,200 + 3,700 + 2,300 + 5,000 = 7,100 + 80,000 + 20,800 –700
28 + 8,200 –8,200
Bal. 91,200 + 5,000 + 3,700 + 2,300 + 5,000 = 7,100 + 80,000 + 20,800 –700
30 – 1,560 –1,560
Bal. 89,640 + 5,000 + 3,700 + 2,300 + 5,000 = 7,100 + 80,000 + 20,800 –2,260
31 – 295 –295
Bal. 89,345 + 5,000 + 3,700 + 2,300 + 5,000 = 7,100 + 80,000 + 20,800 –2,555
31 – 1,800 –$1,800
Bal. $87,545 + $ 5,000 + $3,700 + $2,300 + $5,000 = $7,100 + $80,000 –$1,800 + $20,800 –$2,555
Problem 1-9B (Continued)
Part 3
Rivera Roofing Company
Income Statement
For Month Ended July 31
Revenues
Roofing fees earned ……………………..…….. $20,800
Expenses
Rivera Roofing Company
Statement of Owner’s Equity
For Month Ended July 31
R. Rivera, Capital, July 1………………………. $ 0
Add: Investment by owner..…….….......... 80,000
Net income………………………….….…. 18 ,245
98,245
Less: Withdrawals by owner……….…....... 1 ,800
R. Rivera, Capital, July 31…………………….. $96 ,445
Rivera Roofing Company
Balance Sheet
July 31
Assets Liabilities
Cash……………………………… $ 87,545 Accounts payable….….……. $ 7,100
Accounts receivable......... 5,000
Problem 1-9B (Concluded)
Part 3—continued
Rivera Roofing Company
Statement of Cash Flows
For Month Ended July 31
Cash paid for utilities……………………………………….….. (295)
Cash paid to employees…………………..….…….….…….. (1,560)
Net cash provided by operating activities.….….…..... $12,645
Investments by owner………………………………………….. 80,000
Withdrawals by owner………………….….…….….…….….. (1,800)
Net cash provided by financing activities................. 78,200
Net increase in cash…………………………………………….. $87,545
Cash balance, July 1……………………………….….…….…. 0
Cash balance, July 31…………………………….….…….….. $87,545
1$7,600 + $8,200 = $15,800
Part 4
If the $5,000 purchase on July 3 had been acquired through an additional
owner investment of cash, then:
Problem 1-10B (15 minutes)
1. Return on assets is net income divided by average total assets (the
average amount invested). For Ski-Doo Company this return is
computed as:
2. Return on assets does not seem satisfactory for the risk involved in
3. We know that revenues less expenses equal net income. Taking the
revenues and net income numbers for Ski-Doo Company we obtain:
4. We know from the accounting equation that the total of liabilities plus
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Problem 1-11B (15 minutes)
1. Return on assets equals net income divided by average total assets.
2. On strictly the amount of sales to consumers, AT&T’s sales of $126,723
are greater than Verizon’s sales of $110,875.
3. Success in returning net income from the amount invested is revealed
4. The reported figures suggest Verizon is more successful in generating
income based on assets. Based on this information alone, we would be
better advised to invest in Verizon than AT&T.
Nevertheless, we would look for additional information in financial
statements and other sources for further guidance. For example, if
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