202 Accounting: Business Reporting for Decision Making
SOLUTION TO 5.2
a. CloudIt Pty Ltd — Calculation of retained earnings as at 31 December 2017Year Profit or loss DividendsRetained
earnings at end
of period1 $(15 000 ) $(15 000 )2 5 000 (10 000 )3 20 000 10 0004 45 000 $12 000 43 0005 70 000 113 000b. CloudIt Pty Ltd — Extract of equity section of balance sheet as at 31 December 2017
CloudIt Pty Ltd
Extract of equity section of balance sheet as at 31 December 2017Equity
Capital contributeda
Retained earningsb$ 70 000
113 000
Total equity $ 183 000
a$20 000 + $50 000
bSee part a. for calculation.5.3 Due to poor health, the owners of Heyday Pty Ltd, an importer, intend to sell their business. To
facilitate the sale, the owners have prepared the following balance sheet for prospective purchasers
as at 30 April 2017. You are interested in purchasing the business, and take the balance sheet to your
accountant for advice.Heyday Pty Ltd
Balance sheet as at 30 April 2017Assets
Cash
Accounts receivable
Inventory
Prepayments
Plant and equipment
Goodwill$ 3 000
14 000
43 000
2 000
28 000
29 000
Total assets 119 000
Liabilities
Accounts payable
Loan9 000
14 000
Net assets $ 96 000
Equity
Capital
Profit60 000
36 000
Total equity $ 96 000