Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 2 Basic Accounting Concepts 87

The following amounts were taken from the accounting records of Rainbow Consulting Services,

Inc., as of July 31, 2007. Rainbow Consulting Services began its operations on August 1, 2006.

Capital stock $ 20,000

Cash 79,000

Dividends 50,000

Fees earned 676,600

Interest expense 9,600

Land 251,000

Miscellaneous expense 15,000

Notes payable 80,000

Rent expense 72,000

Salaries expense 160,000

Taxes expense 60,000

Utilities expense 80,000

Statement of Cash Flows

a. Financing 20,000

b. Operating 12, 800

c. Operating 2,000

d. Financing 18 ,000

e. Investing 27,000

f. Operating 1,500

g. Operating 2,750

i. Financing 1,500

Increase in cash 16,050

Statement of

Cash Flows

Income

Statement

Income Statement

b. 12, 8 00 Fees earned

c.2,000 Rent expense

f.1,000 Auto expense

f. 500 Misc. expense

g.2,750 Salary expense

6,550 Net income

b.

c.

f.

g.

INTEGRATED FINANCIAL

STATEMENT FRAMEWORK

a. Investment

b. Fees earned

Balances

c. Rent expense

Balances

d. Issued note payable

Balances

e. Purchased land

Balances

f. Paid expenses

Balances

g. Paid salary expense

Balances

i. Paid dividends

Balances, Oct. 31

Alternate Problem
2-3B

Financial statements

Goals4, 5

1. Net income, $280,000

Balance Sheet

Assets  Liabilities  Stockholders’ Equity

Notes Capital Retained

Cash  Land  Payable  Stock  Earnings

20,000 20,000

12, 800 12, 800

32, 800 20,000 12, 800

2,000 2,000

30, 800 20,000 10, 800

18 ,000 18 ,000

48 , 800 18 ,000 20,000 10, 800

27,000 27,000

21, 800 27,000 18 ,000 20,000 10, 800

1,500 1,500

20,300 27,000 18 ,000 20,000 9,300

2,750 2,750

17,550 27,000 18 ,000 20,000 6,550

1,500 1,500

16,050 27,000 18 ,000 20,000 5,050