Saint MBA560 module 1 homework

Problem 1- 30: Preparing financial statements for two complete accounting cycles Webster Consulting experienced the following transactions for 2012, its first year of operations, and 2013. Assume that all transactions involve the receipt or payment of cash.

Transactions for 2012

1. Acquired $ 20,000 by issuing common stock.

2. Received $ 35,000 cash for providing services to customers.

3. Borrowed $ 25,000 cash from creditors.

4. Paid expenses amounting to $ 22,000.

5. Purchased land for $ 30,000 cash. Transactions for 2013

Beginning account balances for 2013 are:

Cash $ 28,000 Land 30,000 Notes payable 25,000 Common stock 20,000 Retained earnings 13,000

1. Acquired an additional $ 24,000 from the issue of common stock.

2. Received $ 95,000 for providing services.

3. Paid $ 15,000 to creditors to reduce loan.

4. Paid expenses amounting to $ 71,500.

5. Paid a $ 3,000 dividend to the stockholders.

6. Determined that the market value of the land is $ 47,000.

Required a. Write an accounting equation, and record the effects of each accounting event under the appropriate headings for each year. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide appropriate titles for these accounts in the last column of the table.

b. Prepare an income statement, statement of changes in stockholders’ equity, year- end bal-ance sheet, and statement of cash fl ows for each year.

c. Determine the amount of cash that is in the retained earnings account at the end of 2012 and 2013.

d. Examine the balance sheets for the two years. How did assets change from 2012 to 2013?

e. Determine the balance in the Retained Earnings account immediately after Event 2 in 2012 and in 2013 are recorded.

Problem 2- 30 Events for two complete accounting cycles Energy Consulting Company was formed on Junuary 1, 2012.

Events Affecting the 2012 Accounting Period

1. Acquired cash of $ 80,000 from the issue of common stock.

2. Purchased $ 4,200 of suplies on account.

3. Purchased land that cost $ 30,000 cash.

4. Paid $ 4,200 cash to settle accounts payable created in Event 2.

5. Recognized revenue on account of $ 75,000.

6. Paid $ 46,000 cash for other operating expenses.

7. Collected $ 68,000 cash from accounts receivable. Information for 2012 Adjusting Entries

8. Recognized accrued salaries of $ 5,800 on December 31, 2012.

9. Had $ 300 of supplies on hand at the end of the accounting period.

Events Affecting the 2013 Accounting Period

1. Acquired an additional $ 10,000 cash from the issue of common stock.

2. Paid $ 5,800 cash to settle the salaries payable obligation.

3. Paid $ 6,000 cash in advance for a lease on offi ce facilities.

4. Sold land that had cost $ 25,000 for $ 25,000 cash.

5. Received $ 8,400 cash in advance for services to be performed in the future.

6. Purchased $ 1,800 of supplies on account during the year.

7. Provided services on account of $ 90,000.

8. Collected $ 92,000 cash from accounts receivable.

9. Paid a cash dividend of $ 10,000 to the stockholders. Information for 2013 Adjusting Entries

10. The advance payment for rental of the office facilities ( see Event 3) was made on September 1 for a one- year lease term.

11. The cash advance for services to be provided in the future was collected on June 1 ( see Event 5). The one- year contract started June 1.

12. Had $ 350 of supplies on hand at the end of the period.

13. Recognized accrued salaries of $ 6,500 at the end of the accounting period.

Required

a. Identify each event affecting the 2012 and 2013 accounting periods as asset source ( AS), asset use ( AU), asset exchange ( AE), or claims exchange ( CE). Record the effects of each event under the appropriate general ledger account headings of the accounting equation.

b. Prepare an income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for 2012 and 2013, using the vertical statements model.