1-1
PROBLEM 1-32 b. (cont.)
Susan’s Consulting
Balance Sheet
As of December 31, 2015
Assets
Cash
$115,000
Land
40,000
Total Assets
$155,000
Liabilities
Notes Payable
$ 5,000
Stockholders’ Equity
Common Stock
$70,000
Retained Earnings
80,000
Total Stockholders’ Equity
150,000
Total Liabilities and Stockholders’ Equity
$155,000
PROBLEM 1-32 b. (cont.)
Cash Flows From Operating Activities:
Cash Receipts from Customers
$130,000
Cash Payments for Expenses
(75,000)
Net Cash Flow from Operating Activities
$55,000
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Cash Receipts from Stock Issue
$20,000
Cash Payment on Debt
(10,000)
Cash Payment for Dividends
(15,000)
Net Cash Flow from Financing Activities
(5,000)
Net Increase in Cash
50,000
Plus: Beginning Cash Balance
65,000
Ending Cash Balance
$115,000
1-2
c. Retained earnings does not contain cash.
e. Immediately after Event 2 in 2014 is recorded the balance in the Retained Earnings
The 2014 ending balance in Retained Earnings becomes next year’s beginning balance.
Thus, the balance in the Retained Earnings account on January 1, 2015 is $40,000. This
$40,000.
PROBLEM 1-33
Not required:
Crawford Enterprises
Accounting Equation
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
=
Liabilities
+
Common
Stock
+
Retained
Earnings
Beg. Balances
75,000
15,000
25,000
35,000
Earned Revenue
46,000
46,000
Paid Expenses
(26,000)
(26,000)
Paid Dividends
(5,000)
(5,000)
Issued Stock
15,000
15,000
Paid Liability
(10,000)
(10,000)
95,000
=
5,000
+
40,000
+
50,000
a.
Crawford Enterprises
Income Statement
For the Period Ended December 31, 2014
Revenue
$46,000
Expenses
(26,000)
Net Income
$20,000
1-3
PROBLEM 1-33 a. (cont.)
Crawford Enterprises
Statement of Changes in Stockholders’ Equity
For the Period Ended December 31, 2014
Beginning Common Stock
$25,000
Plus: Common Stock Issued
15,000
Ending Common Stock
$40,000
Beginning Retained Earnings
35,000
Plus: Net Income
20,000
Less: Dividends
(5,000)
Ending Retained Earnings
50,000
Total Stockholders’ Equity
$90,000
Crawford Enterprises
Balance Sheet
As of December 31, 2014
Assets
Cash
$95,000
Total Assets
$95,000
Liabilities
$ 5,000
Stockholders’ Equity
Common Stock
$40,000
Retained Earnings
50,000
Total Stockholders’ Equity
90,000
Total Liabilities and Stockholders’ Equity
$95,000
PROBLEM 1-33 a. (cont.)
Crawford Enterprises
Statement of Cash Flows
For the Year Ended December 31, 2014
Cash Flows From Operating Activities:
Cash Receipts from Customers
$46,000
Cash Payments for Expenses
(26,000)
1-4
Net Cash Flow from Operating Activities
$20,000
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Cash Receipts from Stock Issue
15,000
Cash Payments to Creditors
(10,000)
Cash Dividend to Stockholders
(5,000)
Net Cash Flow from Financing Activities
-0-
Net Increase in Cash
20,000
Plus: Beginning Cash Balance
75,000
Ending Cash Balance
$95,000
b. Percentage of assets provided by:
Creditors $ 5,000 ÷ $95,000 = 5.26%
c. The balance in the temporary accounts, revenue, expenses and dividends will be zero on
1-5
a.
Davidson Company
Horizontal Statements Model for 2014
Balance Sheet
Income Statement
Statement of
Assets
=
Liab.
+
Stockholders’ Equity
Revenue
−
Expense
=
Net Inc.
Cash Flows
Event
No.
Cash
+
Land
=
Notes
Payable
+
Common
Stock
+
Retained
Earnings
1
52,000
NA
NA
52,000
NA
NA
NA
NA
52,000 FA
2
20,000
NA
20,000
NA
NA
NA
NA
NA
20,000 FA
3
42,000
NA
NA
NA
42,000
42,000
NA
42,000
42,000 OA
4
(23,000)
NA
NA
NA
(23,000)
NA
23,000
(23,000)
(23,000) OA
5
(6,000)
NA
NA
NA
(6,000)
NA
NA
NA
(6,000) FA
6
10,000
NA
NA
10,000
NA
NA
NA
NA
10,000 FA
7
(10,000)
NA
(10,000)
NA
NA
NA
NA
NA
(10,000) FA
8
(45,000)
45,000
NA
NA
NA
NA
NA
NA
(45,000) IA
9
NA
NA
NA
NA
NA
NA
NA
NA
NA
Total
40,000
+
45,000
=
10,000
+
62,000
+
13,000
42,000
−
23,000
=
19,000
40,000 NC
b. Total Assets = $40,000 + $45,000 = $85,000
c.
Sources of Assets
Event
1. Issue of stock
$ 52,000
2. Cash from loan
20,000
3. Cash from revenue
42,000
6. Issue of stock
10,000
Total Sources of Assets
$124,000
1-6
PROBLEM 1-34 (cont.)
d. Net income is $19,000 (see part a.) Dividends are not expenses so they do not appear on the
income statement.
e.
Operating Activities:
Cash from customers
$42,000
Cash paid for expenses
(23,000)
Net Cash Flow from Operating Activities
$19,000
Investing Activities:
Cash paid to purchase land
$(45,000)
Net Cash Flow from Investing Activities
$(45,000)
Financing Activities:
Cash from stock issues ($52,000 + $10,000)
$62,000
Cash from loan
20,000
Paid cash dividend
(6,000)
Cash paid on loan principal
(10,000)
Net Cash Flow from Financing Activities
$66,000
f. Percentage of assets provided by:
Creditors $10,000 ÷ $85,000 = 11.76%
g. Zero. The revenue is recorded in a Revenue account not in the Retained Earnings
SOLUTIONS TO ANALYZE, THINK, COMMUNICATE – CHAPTER 1
ATC 1-1 (All dollar amounts are in millions.)
a. $2,999
* Liabilities must be computed by subtracting equity from assets.
1-7
d. Sales increased by 5.1% from 2011 to 2012.
A. Cost of sales increased by 5.7% from 2011 to 2012.
1-2
a.
Income Statements (amounts given are in millions)
2017
2016
2015
2014
Revenue
$ 860
$1,520
(a) $2,720
$1,200
Cost and Expenses
(a) (840)
(a) (1,070)
(2,400)
(860)
Income from Cont. Op.
(b) 20
450
320
(a) 340
Unusual Items
-0-
175
(b) (145)
(b) ( 40)
Net Income
$ 20
(b) $ 625
$ 175
$ 300
Balance Sheets
Cash and Marketable Sec.
$ 350
$1,720
(c) $ 750
$ 940
Other Assets
1,900
(c) 1,180
2,500
(c) 2,560
Total Assets
$2,250
$2,900
(d) $3,250
$3,500
Liabilities
(c) $ 730
(d) $1,555
$1,001
(d) $1,300
Stockholders’ Equity
Common Stock
$ 880
$ 720
(e) $1,449
$ 800
Retained Earnings
(d) 640
(e) 625
800
(e) 1,400
Total Stockholders’ Equity
1,520
1,345
(f) 2,249
2,200
Total Liab. and Stk. Equity
$2,250
(f) $2,900
$3,250
$3,500
ATC 1-3
This solution is based on McDonald’s 2012 financial report.
1-8
a. McDonald’s net income for 2012, 2011, and 2010 were as follows:
b. The company had $35,386.5 million of assets at the end of 2012.
d. For 2012, the company’s:
net cash flow from operating activities were $6,966.1 million
ATC 1-4
This problem is designed to test written communication skills. The memo should describe the
balance sheet and the income statement. It should explain that the balance sheet is a statement
of assets, liabilities, and stockholders’ equity at the date of the financial statement. The income
statement gives the amount of revenues and expenses for the designated period. The memo
should also define each of the following terms:
Assets