Financial Accounting: An Integrated Statements Approach, 2nd Edition

f. Paid office salaries, $1,400.

g. Paid interest on the note payable, $60.

h. Purchased land as a future building site, $20,000.

i. Paid dividends, $1,000.

Instructions

1. Indicate the effect of each transaction and the balances after each transaction, using the
   integrated financial statement framework.


2. Prepare an income statement and retained earnings statement for April.


3. Prepare a balance sheet as of April 30, 2007.


4. Prepare a statement of cash flows for April.

72 Chapter 2 Basic Accounting Concepts

Statement of Cash Flows

a. Financing 15,000

b. Financing 8 ,000

c. Operating 11,500

d. Operating 3,500

e. Operating  950

f. Operating 1,400

g. Operating  60

h. Investing 20,000

i. Financing 1,000

Increase in cash and

April 30 cash 7,590

Statement of

Cash Flows

Income

Statement

Income Statement

c. 11,500 Fees earned

d.3,500 Rent expense

e. 650 Auto expense

e. 300 Misc. expense

f.1,400 Salary expense

g. 60 Interest expense

5,590 Net income

c.

d.

e.

f.

g.

INTEGRATED FINANCIAL

STATEMENT FRAMEWORK

a. Investment

b. Issued note payable

Balances

c. Fees earned

Balances

d. Rent expense

Balances

e. Paid expenses

Balances

f. Paid salary expense

Balances

g. Paid interest expense

Balances

h. Purchased land

Balances

i. Paid dividends

Balances, April 30

Solution

(1)

Balance Sheet

Assets  Liabilities  Stockholders’ Equity

Notes Capital Retained

Cash  Land  Payable  Stock  Earnings

15,000 15,000

8 ,000 8 ,000

23,000 8 ,000 15,000

11,500 11,500

34,500 8 ,000 15,000 11,500

3,500 3,500

31,000 8 ,000 15,000 8 ,000

 950  950

30,050 8 ,000 15,000 7,050

1,400 1,400

28 ,650 8 ,000 15,000 5,650

 60  60

28 ,590 8 ,000 15,000 5,590

20,000 20,000

8 ,590 20,000 8 ,000 15,000 5,590

1,000 1,000

7,590 20,000 8 ,000 15,000 4,590