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5-1
PROBLEM 5-25 b. (cont.)
Frankel Inc.
Balance Sheet
As of the End of the Year 2014
Assets
Cash
$ 40,000
Accounts Receivable
$32,000
Less, Allowance for Doubtful Accounts
(2,102)
29,898
Merchandise Inventory
45,000
Total Assets
$114,898
Liabilities
Accounts Payable
$ 20,000
Stockholders’ Equity
Common Stock
$60,000
Retained Earnings
34,898
Total Stockholders’ Equity
94,898
Total Liabilities and Stockholders’ Equity
$114,898
5-2
PROBLEM 5-25 b. (cont.)
Frankel Inc.
Statement of Cash Flows
For the Year Ended 2014
Cash Flows From Operating Activities:
Inflow from Customers
$278,000
Outflow for Inventory
(190,000)
Outflow for Expenses1
(108,000)
Net Cash Flow from Operating Activities
($20,000)
Cash Flows From Investing Activities
-0-
Cash Flows From Financing Activities:
Cash Inflow from Stock Issued
$ 60,000
Net Cash Flow from Financing Activities
60,000
Net Change in Cash
40,000
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$40,000
1Salaries Paid $ 46,000
Other Operating Expenses 62,000
Outflow for Expenses $108,000
5-3
PROBLEM 5-26
c. $46,300 − $1,852 = $44,448
d.
Assets
=
Liab.
+
Equity
Rev.
−
Exp.
=
Net Inc.
Event
Cash
+
Acc. Rec.
−
Allow.
=
Cash Flow
1.
NA
261,000
NA
NA
261,000
261,000
NA
261,000
NA
2.
214,700
(214,700)
NA
NA
NA
NA
NA
NA
214,700 OA
3.
NA
NA
1,852
NA
(1,852)
NA
1,852
(1,852)
NA
5-4
PROBLEM 5-27
a.
Brooks Co. Horizontal Statements Model
Balance Sheet
Income Statement
Statement of
Event
Assets
=
Equity
Rev.
−
Exp.
=
Net Inc.
Cash Flows
Cash
Accts. Rec.
Allow
Notes
Rec.
Int.
Rec.
=
Com.
Stock
Ret. Earn.
1.
60,000
NA
NA
NA
NA
60,000
NA
NA
NA
NA
60,000FA
2.
NA
74,000
NA
NA
NA
NA
74,000
74,000
NA
74,000
NA
3.
62,000
(62,000)
NA
NA
NA
NA
NA
NA
NA
NA
62,000 OA
4.
(15,000)
NA
NA
15,000
NA
NA
NA
NA
NA
NA
(15,000) IA
5.
(47,000)
NA
NA
NA
NA
NA
(47,000)
NA
47,000
(47,000)
(47,000) OA
6.
(2,500)
NA
NA
NA
NA
NA
(2,500)
NA
NA
NA
(2,500) FA
7.1
NA
NA
NA
NA
300
NA
300
300
NA
300
NA
8.2
NA
NA
(740)
NA
NA
NA
(740)
NA
740
(740)
NA
Tot.
57,500
12,000
(740)
15,000
300
=
60,000
24,060
74,300
−
47,740
=
26,560
57,500 NC
1$15,000 x 8% = $1,200; $1,200 x 3/12 = $300
2$74,000 X 1% = $740
5-5
PROBLEM 5-27
b.
Brooks Co.
Financial Statements
For the Year Ended 2014
Income Statement
Service Revenue
$74,000
Operating Expenses
Salaries Expense
$47,000
Uncoll. Accounts Expense
740
Total Operating Expenses
(47,740)
Net Operating Income
26,260
Non-Operating Items
Interest Revenue
300
Net Income
$26,560
Brooks Co.
Balance Sheet
As of the End of the Year 2014
Assets
Cash
$57,500
Accounts Receivable
12,000
Allowance for Doubtful Accounts
15,000
Notes Receivable
(740)
Interest Receivable
300
Total Assets
$84,060
Liabilities
$ -0-
Stockholders’ Equity
Common Stock
$60,000
5-6
PROBLEM 5-27 b. (cont.)
Brooks Co.
Statement of Cash Flows
For the Year Ended 2014
Cash Flows From Operating Activities:
Inflow from Customers
$ 62,000
Outflow for Expenses
(47,000)
Net Cash Flow from Operating Activities
$15,000
Cash Flows From Investing Activities:
Outflow for Notes Receivable
(15,000)
Cash Flows From Financing Activities:
Cash Inflow from Stock Issued
$60,000
Cash Outflow for Dividends
(2,500)
Net Cash Flow from Financing Activities
57,500
Net Change in Cash
57,500
Plus: Beginning Cash Balance
-0-
Ending Cash Balance
$57,500
PROBLEM 5-28
Webb Equipment Co.
Income Statement
For the Year Ended December 31, 2014
Sales Revenue
$350,000
Cost of Goods Sold
(225,000)
Gross Margin
125,000
Operating Expenses
Salaries Expense
$61,200
Operating Expenses
45,000
Rent Expense
7,500
Uncollectible accounts expense
9,600
Total Operating Expenses
(123,300)
Operating Income
1,700
5-7
Non-Operating Items
Interest Revenue
12,000
Interest Expense
(1,300)
Total Non-Operating Items
10,700
Net Income
$ 12,400
PROBLEM 5-28 (cont.)
Webb Equipment Co.
Balance Sheet
As of December 31, 2014
Assets
Current Assets
Cash
$ 16,700
Accounts Receivable
$92,000
Allow. for Doubtful Accounts
(6,500)
85,500
Inventory
105,000
Interest Receivable
2,100
Prepaid Rent
16,100
Supplies
4,500
Notes Receivable
15,000
Total Current Assets
$244,900
Property, Plant and Equipment
Office Equipment
47,000
Accumulated Depreciation
(12,000)
35,000
Land
45,000
Total Property, Plant and Equipment
80,000
Total Assets
$324,900
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts Payable
$ 48,000
Unearned Revenue
42,000
Interest Payable
1,900
Salaries Payable
14,500
Total Current Liabilities
$106,400
Long-Term Liabilities
Notes Payable
26,000
Total Long-Term Liabilities
26,000
5-8
Total Liabilities
132,400
Stockholders’ Equity
Common Stock
70,000
Retained Earnings
122,500*
Total Stockholders’ Equity
192,500
Total Liabilities and Stockholders’ Equity
$324,900
*Must be computed: $120,100, Beg. Retained Earnings + $12,400, Net Income − $10,000, Dividends
= $122,500, Ending Retained Earnings
PROBLEM 5-29
Account analysis provided for the use of the instructor.
Accounts Receivable
Beg. Bal. $ 36,000
Sales on account 160,000
Write-Offs (1,200)
Less: End. Bal (32,000)
Cash Collected $162,800
Allowance for Doubtful Accounts
Beg. Bal. $2,000
Write-Offs (1,200)
Less, End Bal. (2,200)
Uncoll Accts. Exp. $1,400
Notes Receivable
Beg Bal. $50,000
End. Bal. $50,000
Interest Receivable
Beg. Bal. $2,000
Interest Revenue 3,000
Less End. Bal 5,000
Cash Collected $ -0-
a. Cash collected: $162,800
Uncollectible Accounts Expense: $1,400
5-9
5-10
PROBLEM 5-30
a.
Iupe Supply Company Horizontal Statements Model
Balance Sheet
Income Statement
Statement
Assets
=
Equity
of
Event
Cash
+
A. Rec.
−
Allow.
+
Mdse Inv.
=
Com.
Stock
+
Ret. Earn.
Rev.
−
Exp.
=
Net
Income
Cash Flows
1.
50,000
NA
NA
NA
50,000
NA
NA
NA
NA
50,000 FA
2.
(120,000)
NA
NA
120,000
NA
NA
NA
NA
NA
(120,000) OA
13a.
50,000
NA
NA
NA
NA
50,000
50,000
NA
50,000
50,000 OA
23b.
NA
111,550
NA
NA
NA
111,550
115,000
3,450
111,550
NA
3c.
NA
15,000
NA
NA
NA
15,000
15,000
NA
15,000
NA
3d.
NA
NA
NA
(95,000)
NA
(95,000)
NA
95,000
(95,000)
NA
4.
111,550
(111,550)
NA
NA
NA
NA
NA
NA
NA
111,550 OA
5.
11,300
(11,300)
NA
NA
NA
NA
NA
NA
NA
11,300 OA
6.
(51,500)
NA
NA
NA
NA
(51,500)
NA
51,500
(51,500)
(51,500) OA
37.
NA
NA
185*
NA
NA
(185)
NA
185
(185)
NA
Bal.
51,350
+
3,700
−
185
+
25,000
=
50,000
+
29,865
180,000
150,135
29,865
51,350 NC
13a, cash sales; 3b, credit card sales; 3c, sales on account; 3d, cost of goods sold
2$115,000 x 3% = $3,450 credit card expense
3$3,700 x 5% = $185
5-11
PROBLEM 5-30 (cont.)
b.
Iupe Supply Company
Financial Statements
For the Year Ended 2014
Income Statement
Sales Revenue
$180,000
Cost of Goods Sold
(95,000)
Gross Margin
85,000
Operating Expenses
Credit Card Expense
$ 3,450
Selling & Adm. Expenses
51,500
Uncoll. Accts. Expense
185
Total Operating Expenses
(55,135)
Net Income
$ 29,865
Statement of Changes in Stockholders’ Equity
Beginning Common Stock
$ -0-
Plus: Stock Issued
50,000
Ending Common Stock
$50,000
Beginning Retained Earnings
$ -0-
Plus: Net Income
29,865
Ending Retained Earnings
29,865
Total Stockholders’ Equity
$79,865
