FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E 1-40B
(15-20 min.)
Solution:
Cash flows from operating activities:
Net income 184,300$
Adjustments to reconcile net income to net
cash provided by operating activities 1,500
1. Prepare the statement of cash flows of Earl Coffee Roasters Corp., for
the month ended August 31, 2016. Using Exhibit 1-11 as a model, show
with arrows the relationships among the income statement, statement of
retained earnings, balance sheet, and statement of cash flows.
Earl Coffee Roasters Corp.
Statement of Cash Flows
For the Month Ended August 31, 2016
Chapter 1: The Financial Statements Page 41 of 70
Cash flows from investing activities:
Acquisition of equipment (202,100)$
Cash flows from financing activities:
Net increase in cash 5,300$
Cash balance, August 1, 2016 0
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
E 1-41B
(10-15 min.)
Solution:
Complete the report giving him your opinion of net income, dividends, financial
position, and cash flows during his first month of operations.
TO: Owner of Earl Coffee Roasters Corp.
FROM: Student Name
SUBJECT: Opinion of net income, dividends, financial position, and cash
flows
Chapter 1: The Financial Statements Page 42 of 70
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
olution:
Req. 1
Revenue (millions)
Service revenue 150$
Expenses:
Chapter 1: The Financial Statements Page 43 of 70
Req. 2
Young Company
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 3
ASSETS LIABILITIES
Current assets: Current Liabilities:
Cash 160$ Accounts payable 63
Accounts receivable 62 Total current liabilities 63
Chapter 1: The Financial Statements Page 44 of 70
Total current assets 222 Long-term liabilities:
Property and equipment 34 Long-term notes payable 25
Other long-term assets 19 Total liabilities 88
Total assets 275$ 275$
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Quiz
Q1-43 c
Q1-44
b
Q1-45 b
Chapter 1: The Financial Statements Page 45 of 70
Q1-47 c
Q1-49 b
Q1-50 a
Q1-51 a
Q1-53 d
Q1-54 d
Q1-56 c
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P 1-58A
(30 min.)
Solution:
Req. 1
83$ 43$ 15$
43 14 7
1) Compute the missing amount (?) for each company—amounts in millions.
2) At the end of the year, which company has the highest net income? highest
percent of net income to revenues?
Beginning:
Assets
Liabilities
Crystal
Co.
Lowell Inc.
Broom
Corp
BALANCE SHEET
Chapter 1: The Financial Statements Page 46 of 70
89$ 61$ 18$
45 26 6
38 23 3
34$ 26$ 1$
Revenues
Expenses
Ending:
Assets
Liabilities
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 2
Net income
Crystal Co.
Lowell Inc.
Broom Corp
6$
2$
10$
Highest
Chapter 1: The Financial Statements Page 47 of 70
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P 1-59A
(20-25 min.)
Solution:
Req. 1
10,500$ 5,000$
2,800 55,000
15,500 60,000
Cash
Accounts receivable
1. Prepare the correct balance sheet and date it properly. Compute total assets,
total liabilities, and stockholders’ equity.
2. Is Salem News actually in better (or worse) financial position than the erroneous
balance sheet reports? Give the reason for your answer.
3. Identify the accounts listed on the incorrect balance sheet that should not be
reported on the balance sheet. State why you excluded them from the correct
balance sheet you prepared for Requirement 1. On which financial statement should
these accounts appear?
Liabilities
Salem News, Inc.
Balance Sheet
October 31, 2016
Accounts payable
Note payable
Total liabilities
Assets
Notes receivable
Chapter 1: The Financial Statements Page 48 of 70
84,000
Req. 2
Stockholders’ equity*
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
Req. 3
The following accounts are not reported on the balance sheet because they
are expenses. These accounts are reported on the income statement.
Utilities expense
Chapter 1: The Financial Statements Page 49 of 70
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P 1-60A
(20-25 min.)
Solution:
Req. 1
48,000$ Accounts payable 2,000$
2,000 Note payable 132,000
Land 168,000 Total liabilities 134,000
Caden Healey, Realtor, Inc.
Balance Sheet
December 31, 2017
Office supplies
Cash
1. Prepare the balance sheet of the real estate business of Caden Healey Realtor,
Inc., at December 31, 2017.
2. Does it appear that the realty business can pay its debts? How can you tell?
3. Identify the personal items given in the preceding facts that should not be
reported on the balance sheet of the business.
Liabilities
Assets
Chapter 1: The Financial Statements Page 50 of 70
Req. 2
Req. 3
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P 1-61A
(30-45 min.)
Solution:
Req. 1
Revenue
Service revenue 457,600$
Expenses:
Salary expense 108,500$
Rent expense 40,600
1. Prepare the income statement of Beckwith Garden Supply, Inc., for the year
ended December 31, 2016.
2. Prepare the company’s statement of retained earnings for the year.
3. Prepare the company’s balance sheet at December 31, 2016.
4. Analyze Beckwith Garden Supply, Inc., by answering these questions:
a. Was Beckwith Garden Supply profitable during 2016? By how much?
b. Did retained earnings increase or decrease? By how much?
c. Which is greater, total liabilities or total stockholders’ equity? Who owns more of
Beckwith Garden Supply’ assets, creditors of the company or the Beckwith Garden
Supply’ stockholders?
Beckwith Garden Supply Inc.
Income Statement
Year Ended December 31, 2016
Chapter 1: The Financial Statements Page 51 of 70
Interest expense 10,200
Utilities expense 8,500
Req. 2
Retained earnings, December 31, 2015 364,200$
Beckwith Garden Supply Inc.
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
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
Req. 4
December 31, 2016
Beckwith Garden Supply Inc.
Balance Sheet
Chapter 1: The Financial Statements Page 52 of 70
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P 1-62A
(20 min.)
Solution:
Req. 1
Cash flows from operating activities:
Net income 3,040$
Adjustments to reconcile net income
to net cash provided by operating activities 2,410
Net cash provided by operating activities 5,450
Riley Company
Statement of Cash Flows
Year Ended March 31, 2017
1. Prepare a cash flow statement for the year ended March 31, 2017. Not all items
given appear on the cash flow statement.
2. What activities provided the largest source of cash? Is this a sign of financial
strength or weakness?
Chapter 1: The Financial Statements Page 53 of 70
Cash flows from financing activities:
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P 1-63A
(40-50 min.)
Solution:
INCOME 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)
1. Complete Santos Corporation’s financial statements by determining the
missing amounts denoted by the letters.
Chapter 1: The Financial Statements Page 54 of 70
Beginning balance 3,840 = $ n $2,650
Dividends declared (90) (110)
Cash 1,140 = $ q $ e =1,320
Property, plant and equipment 1,507 1,346
Other assets 11,553 = r 11,799
Current liabilities 3,625 = $ t 5,650
Long-term debt 4,450 3,380
FINANCIAL ACCOUNTING – Eleventh Edition Solutions Manual
P 1-64 B
(30 min.)
Solution:
Req. 1
82$ 42$ 17$
44 20 10
3 2 3
Beginning:
Assets
Liabilities
Common stock
Which company has the, highest net income? highest percent of
net income to revenues?
Pearl Co.
Loomis
Co.
Bryant
Corp.
BALANCE SHEET
Chapter 1: The Financial Statements Page 55 of 70
35 20 4
86$ 62$ 19$
46 33 9
37 14 3
35$ 20$ 4$
7 10 1
Beginning RE
+ Net income
– Dividends declared
Revenues
Expenses
Ending:
Assets
Liabilities
Common stock