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
Niko’s Maintenance Co.
Statement of Retained Earnings
For Month Ended June 30
Retained earnings, June 1 ………………………….. $ 0
Niko’s Maintenance Co.
Balance Sheet
June 30
Assets
Liabilities
Cash …………………………..
$130,060
Accounts payable ……………………..
$ 0
Accounts receivable ……..
675
Equity
Equipment …………………...
2,400
130,000
_______
3,135
Total assets ………………....
$133,135
$133,135
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 received from customers1 …………………………...
$ 16,250
Cash paid for rent ………………………………………………..
(6,000)
Cash paid for advertising ……………………………………..
(1,150)
Cash paid for telephone ……………………………………….
(150)
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
Investments from stockholders …………………………...
130,000
Dividends …………………………………………………………….
(4,000)
Net cash provided by financing activities ……………..
126,000
Net increase in cash …………………………………………….
$130,060
Cash balance, June 1 …………………………………………..
0
Cash balance, June 30 …………………………………………
$130,060
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
+
Common
Stock
–
Dividends
+
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.
25,000
1,200
+
36,700
+
150,000
=
2,900
+
110,000
+
100,000
e.
– 750
–
$ 750
Bal.
24,250
+
1,200
+
36,700
+
150,000
=
2,900
+
110,000
+
100,000
–
750
f.
+
$2,800
+
$2,800
Bal.
24,250
+
2,800
+
1,200
+
36,700
+
150,000
=
2,900
+
110,000
+
100,000
+
2,800
–
750
g.
+ 4,000
+
4,000
Bal.
28,250
+
2,800
+
1,200
+
36,700
+
150,000
=
2,900
+
110,000
+
100,000
+
6,800
–
750
h.
– 11,500
–
$11,500
Bal.
16,750
+
2,800
+
1,200
+
36,700
+
150,000
=
2,900
+
110,000
+
100,000
–
11,500
+
6,800
–
750
i.
+ 1,800
–
1,800
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
Problem 1-9B (60 minutes) Parts 1 and 2
Assets
=
Liabilities
+
Equity
Date
Cash
+
Accounts
Receivable
+
Office
Supplies
+
Office
Equipment
+
Roofing
Equipment
=
Accounts
Payable
+
Common
Stock
–
Dividends
+
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
Bal.
85,300
+
600
+
5,000
=
4,000
+
80,000
+
7,600
–
700
10
+
$2,300
+ 2,300
Bal.
85,300
+
600
+
2,300
+
5,000
=
6,300
+
80,000
+
7,600
–
700
15
+
$8,200
+
8,200
Bal.
85,300
+
8,200
+
600
+
2,300
+
5,000
=
6,300
+
80,000
+
15,800
–
700
17
+
3,100
+ 3,100
Bal.
85,300
+
8,200
+
3,700
+
2,300
+
5,000
=
9,400
+
80,000
+
15,800
–
700
23
– 2,300
– 2,300
Bal.
83,000
+
8,200
+
3,700
+
2,300
+
5,000
=
7,100
+
80,000
+
15,800
–
700
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
Rivera Roofing Company
Statement of Retained Earnings
For Month Ended July 31
Retained earnings, July 1 …………………….. $ 0
Rivera Roofing Company
Balance Sheet
July 31
Assets Liabilities
Cash ……………………………… $ 87,545 Accounts payable ………….. $ 7,100
Problem 1-9B (Concluded)
Part 3—continued
Rivera Roofing Company
Statement of Cash Flows
For Month Ended July 31
Cash flows from operating activities
Cash received from customers1 …………………………...
$15,800
Cash paid for rent ………………………………………………..
(700)
Cash paid for supplies …………………………………………
(600)
Cash paid for utilities …………………………………………..
(295)
Cash paid to employees …………………………..…………..
(1,560)
Net cash provided by operating activities ……………..
$12,645
Cash flows from investing activities
Purchase of roofing equipment …………………………….
(1,000)
Purchase of office equipment ……………………………….
(2,300)
Net cash used by investing activities ……………………
(3,300)
Cash flows from financing activities
Investments from stockholders …………………………….
80,000
Cash dividends…………………………………………………….
(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
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
4. We know from the accounting equation that the total of liabilities plus
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
3. Success in returning net income from the amount invested is revealed
assets.
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.