Chapter 1 Introduction to Accounting and Business

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PR 1-2B  Financial statements OBJ. 5

1. Net income: The amounts of the assets and liabilities of Wilderness Travel Service at April 30, 2014,
$200,000 the end of the current year, and its revenue and expenses for the year are listed below.
The retained earnings was $145,000 at May 1, 2013, the beginning of the current year,
and dividends of $40,000 were paid during the current year.

Accounts payable $ 25,000 Rent expense $ 75,000

Accounts receivable 210,000 Supplies 9,000
Capital stock 35,000 Supplies expense 12,000
Cash 146,000 Taxes expense 10,000
Fees earned 875,000 Utilities expense 38,000
Miscellaneous expense 15,000 Wages expense 525,000

Instructions
1. Prepare an income statement for the current year ended April 30, 2014.
2. Prepare a retained earnings statement for the current year ended April 30, 2014.
3. Prepare a balance sheet as of April 30, 2014.
4. What item appears on both the income statement and retained earnings statement?

1. Net income: PR 1-3B  Financial statements OBJ. 5

$10,900 Jose Loder established Bronco Consulting on August 1, 2014. The effect of each transac-
tion and the balances after each transaction for August are shown below.
Assets 5 Liabilities 1 Stockholders’ Equity
Accounts Accounts Capital Fees Salaries Rent Auto Supplies Misc.
Cash + Receivable + Supplies = Payable + Stock − Dividends + Earned − Expense − Expense − Expense − Expense − Expense
a. +75,000 +75,000
b. +9,000   +9,000
Bal.  75,000 9,000 9,000  75,000
c. +92,000    +92,000
Bal.   167,000 9,000 9,000  75,000   92,000
d.   –27,000    –27,000
Bal. 140,000 9,000 9,000  75,000   92,000 –27,000
e. –6,000 –6,000
Bal.   134,000 9,000  3,000  75,000   92,000 –27,000
f. +33,000 +33,000
Bal. 134,000 33,000 9,000  3,000  75,000 125,000 –27,000
g.   –23,000 –15,500 –7,500
Bal. 111,000 33,000 9,000  3,000  75,000 125,000 –27,000 –15,500 –7,500
h.  –58,000 –58,000
Bal. 53,000 33,000 9,000  3,000  75,000 125,000 –58,000 –27,000 –15,500 –7,500
i. –6,100 –6,100
Bal.   53,000 33,000 2,900  3,000  75,000 125,000 –58,000 –27,000 –15,500 –6,100 –7,500
j. –5,000 –5,000
Bal.      48,000  33,000 2,900   3,000  75,000 –5,000 125,000 –58,000 –27,000 –15,500 –6,100 –7,500

Instructions
1. Prepare an income statement for the month ended August 31, 2014.
2. Prepare a retained earnings statement for the month ended August 31, 2014.
3. Prepare a balance sheet as of August 31, 2014.
4. (Optional). Prepare a statement of cash flows for the month ending August 31, 2014.

PR 1-4B  Transactions; financial statements OBJ. 4, 5

2. Net income: On April 1, 2014, Maria Adams established Custom Realty. Maria completed the following
$10,850 transactions during the month of April: