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$ 32,500
cash flows from operating activities:
$(117,000)
(117,000)
$102,403
57,087
—
Less withdrawals
Purchase of equipment
Cash flows from operating activities:
Statement of Owner's Equity
For the Year Ended January 31, 2014
Adjustments to reconcile net income to net
Net income
For the Year Ended December 31, 2014
Cash flows from investing activities:
Cash flows from financing activities:
Net cash flows used by investing activities
Owner's capital, January 31, 2013
Net income for the year
Mrs. Shah's Cookies
E10A. Statement of Owner's Equity
E9A. Statement of Cash Flows
Arlington Service Company
Statement of Cash Flows
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© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
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●
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●
●
●
●
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1. b 5. l 9. c
2. k 6. f 10. d
3. g 7. a 11. e
4. i 8. j 12. h
Thus, start with (c), which must equal $3,000 (check: $29,000 + $3,000 – $2,000 = $30,000).
Then, (b) equals (c), or $3,000. Thus, (a) must equal $8,100 (check: $11,100 – $8,100 =
$3,000). Because (e) equals $30,000 (ending balance from the statement of owner's
E11A. Preparation and Integration of Financial Statements
that has been granted a charter from the state and is legally separate from its owners
Net income links the income statement and the statement of owner's equity. The ending
balance of owner's equity links the statement of owner's equity and the balance sheet.
A partnership is a business that has two or more owners. A corporation is a business unit
Customers
Economic planners
Regulators
equal (f), or $46,000.
People who are interested in Avalon's financial statements are the following:
Management
Investors (owners of the company)
ship of a partnership changes, the partnership must be dissolved and another one formed.
E13A. The Nature of Accounting
E12A. Users of Accounting Information and Forms of Business Organization
Tax authorities
Employees
Creditors
1-10
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
2.
3.
AICPA:
IASB:
IRS:
PCAOB:
Note to Instructor: Solutions for Exercises: Set B are provided separately on the Instructor's
Resource CD and website.
a
c
b
American Institute of Certified Public Accountants
Public Company Accounting Oversight Board
Internal Revenue Service
International Accounting Standards Board
CPA:
E14A. Accounting Abbreviations
Certified Public Accountant
E15A. Ethics and Accounting
1-11
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1. IS Utilities expense BS
BS Building IS
$1,100 $ 6,800 (g) $240
$2,900 $24,400 $340
$4,600 (d) $31,000 $380 (q)
$1,600 $ 5,000 $— (r)
2.
necessary to determine the ending balance of owner's capital. The statement of
The income statement must be prepared first because the amount of net income is
P2. Integration of Financial Statements
Set A
Set B
Income Statement
Beginning balance
Statement of Owner's Equity
Balance Sheet
Set C
1.
Problems
P1. Preparation and Interpretation of Financial Statements
Accounts payable
Rent expense
Total assets
Total liabilities
Revenue
1-12
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
$400,000
$225,000
20,100
$ 64,300
79,200
$ 71,700 Accounts payable $ 3,600
4,500 22,700
2.
Fuel Designs
Revenues:
December 31, 2014
Net income for the year
Liabilities
Fuel Designs
Marketing expense
Owner's capital, December 31, 2013
Statement of Owner's Equity
For the Year Ended December 31, 2014
Assets
Balance Sheet
Income Statement
For the Year Ended December 31, 2014
Expenses:
Commission sales revenue
Commissions expense
Cash
Accounts receivable
The statement of cash flows is very useful in assessing whether a company's operations
are generating sufficient funds to support expansion. The statement tells whether
Commissions payable
Fuel Designs
P3. Preparation and Interpretation of Financial Statements
1-13
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
$159,200
$37,200
$—
5,000
1,600
—
$ 1,800 $19,400
24,600 1,300
6,600
2.
low in that it has earned only $1,600 on revenues of $159,200. Liquidity is low because
Frequent Ad
Equipment rental expense
Revenues:
For the Year Ended January 31, 2014
Frequent Ad
Income Statement
Accounts receivable
Cash
Salaries payable
Frequent Ad
Liabilities
Assets
The company is challenged both in terms of profitability and liquidity. Profitability is
Accounts payable
Net income for the year
Balance Sheet
Owner's Equity
A. Francis, capital
P4. Preparation and Interpretation of Financial Statements
January 31, 2014
A. Francis, capital, January 31, 2013
Investments by A. Francis
Less withdrawals
Statement of Owner's Equity
Advertising service revenue
Expenses:
Total liabilities and
For the Year Ended January 31, 2014
1-14
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
2.
3.
P5. Use and Interpretation of Financial Statements
The income statement shows net income of $3,775 earned by the company over a
month. The amount of net income is necessary for the preparation of the statement
of owner's equity. The statement of owner's equity shows an ending balance of
come on revenues of $6,100. The owner also withdrew money in the amount of
form to GAAP in all material respects.
The company appears to be very profitable because it has earned $3,775 of net in-
$2,400. However, the return on total assets (net income divided by total assets) is
pany might experience some challenges in its liquidity position in the future because
only 6.98 percent, or $0.0698 on each dollar of assets invested. Moreover, the com-
shown on the balance sheet.
cause it shows the earnings of the business. The cash flow statement is most closely
The income statement is most closely associated with the goal of profitability, be-
1-15
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
Wages expense BS
Equipment IS
Equipment rental expense OE
$2,400 $13,200 (g) $ 480
1,620 (a) 10,000 184 (m)
$5,800 $48,800 $480
780 (c) 3,200 296 (n)
$3,200 $10,000 $ 600 (r)
2.
Revenues
Set A
Income Statement
Net income
Expenses
Statement of Owner's Equity
Total liabilities
Beginning balance
P7. Integration of Financial Statements
necessary to determine the ending balance of owner's equity. The statement of
1. Set CSet B
P6. Preparation and Interpretation of Financial Statements
Alternate Problems
The income statement must be prepared first because the amount of net income is
IS
BS
1.
IS
Accounts payable
Rent expense
Withdrawals
1-16
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
