M1–14
Amazin’
Corp.
Best Tech,
Inc.
Colossal
Corp.
Common Stock
$5
$15
$100
Dividends
10
5
50
Net Income
(a) 25
(d) 20
(g) 100
Retained Earnings, Beginning of Year
30
0
200
Retained Earnings, End of Year
(b) 45
(e) 15
(h) 250
Total Assets
(c) 80
(f) 60
(i) 700
Total Expenses
75
30
200
Total Liabilities
30
30
350
Total Revenues
100
50
300
M1–15
(a) 100 (b) 20 (c) 3,700. Electronic Arts was profitable because its revenues ($3,800)
were greater than its expenses ($3,700), resulting in the net income of $100 reported on
the income statement.
The above amounts are determined using the various relationships that exist in the
financial statements. Because this exercise excludes two pieces of information from
For the Year Ended xxxx
Fundamentals of Financial Accounting, 5/e 1-12
M1–16
Req. 1 SOUTHWEST AIRLINES, INC.
Income Statement
For the Year Ended December 31, 2012
(Amounts in millions)
Revenues
Ticket Revenues
$ 17,100
Total Revenue
17,100
Expenses
Salaries and Wages Expense
3,280
Aircraft Fuel Expense
8,700
Repairs and Maintenance Expense
1,200
Landing Fees Expense
3,100
Interest Expense
130
Income Tax Expense
260
Total Expenses
16,670
Net Income
$ 430
Req. 2
SOUTHWEST AIRLINES, INC.
Statement of Retained Earnings
For the Year Ended December 31, 2012
(Amounts in millions)
Retained Earnings, January 1, 2012 $ 5,370
Fundamentals of Financial Accounting, 5/e 1-13
M1–16 (continued)
Req. 3 SOUTHWEST AIRLINES, INC.
Balance Sheet
At December 31, 2012
(Amounts in millions)
Assets
Cash
$ 2,970
Accounts Receivable
580
Supplies
680
Equipment
14,370
Total Assets
$18,600
Liabilities
Accounts Payable
$4,650
Notes Payable
6,950
Total Liabilities
11,600
Stockholders’ Equity
Common Stock
1,220
Retained Earnings
5,780
Total Stockholders’ Equity
7,000
Total Liabilities and Stockholders’ Equity
$18,600
Req. 4
Southwest Airlines financed its assets primarily with liabilities ($11,600) as opposed to
stockholders’ equity ($7,000).
ANSWERS TO EXERCISES
E1-1
a) Assets = Liabilities + Stockholders’ Equity
= $13,750 + $4,450
= $18,200
= Assets reported on the balance sheet
E1-2
a) Assets = Liabilities + Stockholders’ Equity
= $18,500 + $61,000
= $79,500
= Assets reported on the balance sheet
Fundamentals of Financial Accounting, 5/e 1-15
E1-3
Req. 1 DSW, Inc.
Balance Sheet
At February 2, 2013
(in thousands)
Assets
Cash
$ 313,200
Accounts Receivable
114,800
Inventory
393,800
Equipment
440,300
Total Assets
$1,262,100
Liabilities
Accounts Payable
$ 275,300
Notes Payable
128,200
Total Liabilities
403,500
Stockholders’ Equity
Common Stock
841,600
Retained Earnings
17,000
Total Stockholders’ Equity
858,600
Total Liabilities and Stockholders’ Equity
$1,262,100
Req. 2
Fundamentals of Financial Accounting, 5/e 1-16
E1-4
Req. 1 READER DIRECT
Balance Sheet
At December 31, 2014
Assets
Liabilities
Cash
$ 47,500
Accounts Payable
$ 8,000
Accounts Receivable
26,900
Note Payable
2,850
Equipment
48,000
Total Liabilities
10,850
Stockholders’ Equity
Common Stock
98,000
Retained Earnings
13,550
Total Stockholders’ Equity
111,550
Total Assets
$122,400
Total Liabilities and
Stockholders’ Equity
$122,400
Req. 2
Beginning Retained Earnings (R/E) + Net Income – Dividends = Ending R/E, so
Req. 3
Req.4
Beginning Retained Earnings (R/E) + Net Income – Dividends = Ending R/E, so
Fundamentals of Financial Accounting, 5/e 1-17
E1-5
Req. 1
Label
Req. 2
Type
a.
Coins and currency
Cash
A
b.
Amounts K·Swiss owes to suppliers of watches
Accounts Payable
L
c.
Amounts K·Swiss can collect from customers
Accounts Receivable
A
d.
Amounts owed to bank for loan to buy building
Notes Payable
L
e.
Property on which buildings will be built
Land
A
f.
Amounts distributed from profits to stockholders
Dividends
SE
g.
Amounts earned by K·Swiss by selling watches
Sales Revenue
R
h.
Unused paper in K·Swiss head office
Supplies
A
i.
Cost of paper used up during month
Supplies Expense
E
j.
Amounts contributed to K·Swiss by stockholders
Common Stock
SE
E1-6
Req. 1 CINEMARK HOLDINGS, INC
Income Statement
For the Quarter Ended September 30, 2013
(in thousands)
Revenues
Admissions Revenue
$479,600
Concessions Revenue
308,000
Total Revenues
787,600
Expenses
Office Expenses
254,700
Film Rental Expenses
254,800
Rent Expense
85,100
Concessions Expenses
39,000
Salaries and Wages Expense
73,300
Total Expenses
706,900
Net Income
$ 80,700
The question marks in the exercise correspond to Total Expenses of $706,900 and Net
Income of $80,700, as determined above.
Req. 2
E1-7 HOME REALTY, INCORPORATED
Income Statement
For the Year Ended December 31
Revenue:
Sales Revenue $166,000
Expenses:
Salaries and Wages Expense 97,000
E1-8
A Net Income = $110,000 – $82,000 = $28,000
Stockholders’ Equity = $150,000 – $70,000 = $80,000
B Total Revenues = $80,000 + $12,000 = $92,000
E1-9
Req. 1 MIAMI MUSIC CORPORATION
Income Statement
For the Month Ended January 31
Total Revenues $131,000
Operating Expenses 90,500
Total Liabilities 25,700
Stockholders’ Equity:
Common Stock 30,600
Retained Earnings* 40,500
Total Stockholders’ Equity 71,100
E1–10
Req. 1
Pest Away Corp. generated more revenue from providing services to customers as
opposed to selling goods.
Req. 2
Salaries and Wages = $33,000 x 2 = $66,000
E1–11
(O)
(1) Cash paid to suppliers and employees
O
(2) Cash received from customers
F
(3) Cash received from borrowing using a long-term note
F
(4) Cash received from issuing stock
(I)
(5) Cash paid to purchase equipment
E1–12
(I)
(1) Purchases of equipment
O
(2) Cash received from customers
F
(3) Cash received from issuing stock
(O)
(4) Cash paid to suppliers and employees
(F)
(5) Cash paid on notes payable
I
(6) Cash received from selling equipment