(30-45 min.) P 1-61A
Req. 1
Beckwith Garden Supply, Inc.
Income Statement
Year Ended December 31, 2016
Revenue
Service revenue …………………….
$457,600
Expenses
Salary expense ……………………..
$108,500
Rent expense ………………………..
Interest expense ……………………
Property tax expense …………….
Total expenses………………………
Net income ……………………………………
40,600
10,200
Req. 2
Beckwith Garden Supply, Inc.
Statement of Retained Earnings
Year Ended December 31, 2016
Retained earnings, December 31, 2015 ……………….
$ 364,200
Add: Net income ………………………………………………
282,500
Subtotal
Less: Dividends declared…………………………………..
Retained earnings, December 31, 2016 ……………….
$ 540,700
(continued) P 1-61A
Req. 3
ASSETS
LIABILITIES
Cash
$ 41,000
Accounts payable
$ 24,000
Accounts receivable
84,600
Note payable
99,500
Supplies
6,800
Interest payable
2,500
Land
27,000
Total liabilities
126,000
Building
401,000
STOCKHOLDERS’
Equipment
119,000
Common stock
12,700
Retained earnings
Total liabilities and
Total assets
Req. 4
a. Beckwith Garden Supply was profitable; net income was $282,500.
b. Retained earnings increased by $176,500 — from $364,200 to
$540,700.
(20 min.) P 1-62A
Req. 1
Riley Company
Statement of Cash Flows
Year Ended March 31, 2017
Millions
Cash flows from operating activities:
Net income ………………………………………………………..
$ 3,040
Adjustments to reconcile net income to net cash
provided by operating activities ……………………..
Net cash provided by operating activities ……….
5,450
Cash flows from investing activities:
Purchases of property, plant, and equipment ………
$(3,505)
Sales of property, plant, and equipment ……………..
45
Other investing cash payments ………………………….
(170)
Net cash used for investing activities ……………..
(3,630)
Cash flows from financing activities:
Issuance of common stock ………………………………..
$ 165
Payment of dividends ………………………………………..
Net cash used for financing activities ……………..
Net increase in cash ………………………………………………
$ 1,715
Cash, beginning …………………………..………………………..
210
Cash, ending …………………………………………………………
$ 1,925
Req. 2
Operating activities provided the largest amount of cash. This signals
financial strength because operations should be the main source of
cash.
(40-50 min.) P 1-63A
NCOME STATEMENT
2017
2016
Revenues ……………………………………………………….. .
13,710
=
$ k
$15,000
Cost of goods sold ……………………………………………
(11,000)
a
=
(11,820)
Other expenses …………………………………………………
(1,210)
(1,180)
Income before income taxes ………………………………
1,500
2,000
Income taxes (35% tax rate) ……………………………….
525
=
l
(700)
Net income ……………………………………………………….
975
=
$ m
$ b
=
1,300
STATEMENT OF RETAINED EARNINGS
Beginning balance …………………………………………….
3,840
=
$ n
$ 2,650
Net income ……………………………………………………….
975
=
=
Dividends declared ……………………………………………
(90)
(110)
Ending balance …………………………………………………
=
=
BALANCE SHEET
Assets:
Cash …………………………………………………………
1,140
=
$ q
$ e
=
1,320
Property, plant and equipment …………………..
1,507
1,346
Other assets ……………………………………………..
11,553
=
r
11,799
Total assets …………………………..………….
14,200
=
$ s
$14,465
Liabilities:
Current liabilities ………………………………………
3,625
=
Total liabilities …………………………………..
9,050
=
Stockholders’ Equity:
Common stock …………………………..……………..
$ 275
$ 275
Retained earnings ……………………………………..
4,725
=
u
g
=
3,840
Other stockholders’ equity …………………………
150
200
Total stockholders’ equity ………………….
5,150
=
v
4,315
Total liabilities and stockholders’
equity ………………………………………………. holders’ equity
14,200
=
$ w
$ h
=
14,465
STATEMENT OF CASH FLOWS ………………………….
Net cash provided by operating activities …..
650
=
$ x
Net cash used for investing activities …………
Net cash used for financing activities …………
(570)
(540)
Increase (decrease) in cash………………..
(180)
=
Cash at beginning of year ………………………….
1,320
=
y
1,260
(30 min.) P 1-64B
Computed amounts in boxes
Pearl
Co.
Loomis
Co.
Bryant
Corp.
Millions
Balance sheets:
Beginning:
Liabilities ………………………..
Common stock ………………..
Retained earnings ……………
35
20
4
Ending:
Assets …………………………….
$ 86
$ 62
$ 19
Liabilities ………………………..
46
33
9
Common stock ………………..
3
15
7
Retained earnings ……………
37
14
3
Income statement:
Revenues ………………………..
$ 26
Expenses ………………………..
Net income ……………………..
Statement of retained earnings:
Beginning RE ………………….
$ 35
$ 20
$ 4
+ Net income ……………………..
7
10
1
− Dividends declared ………….
(5)
(16)
(2)
= Ending RE ……………………….
$ 37
$ 14
$ 3
(continued) P 1-64B
Pearl Co.
Loomis Co.
Bryant Corp.
Millions
Net income ……………….
$7
$10
$1
Highest
% of net income
to revenues ……………
Highest
(20-25 min.) P 1-65B
Req. 1
Candace Design, Inc.
Balance Sheet
June 30, 2016
ASSETS
LIABILITIES
Cash
$ 8,500
Accounts payable
$ 2,500
Accounts receivable
3,800
Note payable
54,500
Notes receivable
13,000
Total liabilities
57,000
Office supplies
Land
76,000
Equipment
Total liabilities and
Total assets
Req. 2
Candace Design, Inc. is in a better financial position than the
erroneous balance sheet reports. Assets are $10,700 greater and
liabilities are $17,500 less than originally reported, and equity is
$28,200 greater than reported originally.
Req. 3
(20-25 min.) P 1-66B
Req. 1
Billy Higgins Realtor, Inc.
Balance Sheet
June 30, 2017
ASSETS
LIABILITIES
Cash
$ 58,000
Accounts payable
$ 4,000
Office supplies
4,000
Note payable
136,000
Land
157,000
Total liabilities
140,000
Furniture
Franchise
Common stock
Retained earnings
_____
*Total assets ($253,600) − Total liabilities ($140,000) − Common stock
($65,000) = Retained earnings ($48,600).
Req. 2
It appears that Billy Higgins’ business can pay its debts. Total assets
far exceed total liabilities.
Req. 3
Personal items not reported on the balance sheet of the business:
(30-45 min.) P 1-67B
Req. 1
Blue Moon Products, Inc.
Income Statement
Year Ended December 31, 2016
Revenue:
Service revenue ……………………
$458,600
Expenses:
Salary expense …………………….
$108,300
Rent expense ……………………….
40,200
Utilities expense …………………..
Interest expense …………………..
10,800
Property tax expense ……………
Total expenses ……………………..
Net income ……………………………………
Req. 2
Blue Moon Products, Inc.
Statement of Retained Earnings
Year Ended December 31, 2016
Retained earnings, December 31, 2015 ……………….
$364,500
Add: Net income ………………………………………………
283,300
Subtotal
Less: Dividends declared…………………………………..
(108,000)
Retained earnings, December 31, 2016 ……………….
(continued) P 1-67B
Req. 3
Blue Moon Products, Inc.
Balance Sheet
December 31, 2016
ASSETS
LIABILITIES
Cash
$ 41,000
Accounts payable
$ 27,000
Accounts receivable
84,500
Interest payable
2,300
Supplies
6,100
Note payable
99,700
Land
28,000
Total liabilities
129,000
Building
402,000
STOCKHOLDERS’
Equipment
111,000
EQUITY
Common stock
3,800
Retained earnings
539,800
Total liabilities and
Total assets
Req. 4
a. Blue Moon Products was profitable; net income was $283,300.
(20 min.) P 1-68B
Req. 1
Salem Water Company
Statement of Cash Flows
Year Ended March 31, 2017
Millions
Cash flows from operating activities:
Net income ………………………………………………………..
$ 3,060
Adjustments to reconcile net income to net cash
provided by operating activities ……………………..
2,350
Net cash provided by operating activities ……….
5,410
Cash flows from investing activities:
Sales of property, plant, and equipment ……………..
Other investing cash payments ………………………….
(190)
Net cash used for investing activities ……………..
Cash flows from financing activities:
Issuance of common stock ………………………………..
$ 205
Payment of dividends ………………………………………..
(285)
Net cash used for financing activities ……………..
Net increase in cash ………………………………………………
$1,680
Cash, beginning …………………………………………………….
230
Cash, ending …………………………………………………………
$ 1,910
Req. 2
Operating activities provided the bulk of Salem Water Company’s
cash. This is a sign of strength because operations should be the
main source of cash.
(40-50 min.) P 1-69B
(Thousands)
INCOME STATEMENT
2017
2016
Revenues …………………………………………………………..
13,730
=
$ k
$16,175
Cost of goods sold……………………………………………..
(11,020)
a
=
(13,145)
Other expenses ………………………………………………….
(1,200)
(1,210)
Income before income taxes ……………………………….
1,510
1,820
Income taxes (35% tax rate) ………………………………..
529
=
l
637
Net income …………………………………………………….
981
=
$ m
$ b
=
1,183
STATEMENT OF RETAINED EARNINGS
Beginning balance ……………………………………………..
3,783
=
$ n
$ 2,740
Net income ………………………………………………………..
981
=
=
1,183
Dividends declared …………………………………………….
(82)
Ending balance ………………………………………………….
4,682
=
$ p
=
3,783
BALANCE SHEET
Assets:
Cash ……………………………………………………………..
1,140
=
$ q
$ e
=
1,220
Property, plant and equipment ………………………..
1,567
1,306
Other assets ………………………………………………….
11,520
=
r
10,872
Total assets …………………………..…………………..
14,227
=
$ s
$13,398
Liabilities:
Current liabilities ……………………………………………
4,865
=
$ t
$ 5,660
Long-term debt ………………………………………………
4,300
Other liabilities ………………………………………………
Total liabilities ……………………………………………
=
9,210
Stockholders’ Equity:
Common stock ………………………………………………
$ 225
$ 225
Retained earnings ………………………………………….
4,682
=
u
g
=
3,783
Other stockholders’ equity ……………………………..
120
180
Total stockholders’ equity…………………………..
5,027
=
v
4,188
Total liabilities and stockholders’ equity ……..
14,227
=
$ w
$ h
=
13,398
STATEMENT OF CASH FLOWS
Net cash provided by operating activities ………..
=
$ x
Net cash used for investing activities ………………
Net cash used for financing activities………………
Increase (decrease) in cash ………………………..
=
Cash at end of year ………………………………………..
1,140
=
$ z
$ j
=
1,220