Financial Accounting: An Integrated Statements Approach, 2nd Edition

Instructions

By analyzing how the four financial statements are integrated, determine the proper amounts

for (a) through (n).

Solution

a. Utilities expense, $2,160 ($23,120 $12,000$7,640$1,320)

b. Net income, $12,880 ($36,000 $23,120)

c. Net income, $12,880 (same as b)

d. Dividends, $7,200 (from statement of cash flows)

e. Retained earnings, $5,680 ($12,880 $7,200)

f. Total assets, $55,600 ($5,600 $50,000)

g. Capital stock, $48,000 (from the statement of cash flows)

h. Retained earnings, $5,680 (same as e)

i. Total stockholders’ equity, $53,680 ($48,000 $5,680)

j. Total liabilities and stockholders’ equity, $55,600 ($1,920 $53,680) (same as f)

k. Cash payments for operating expenses, $21,200 ($36,000 $14,800)

l. Cash payments for acquisition of land, $50,000 (from balance sheet)

m. Net cash flows from financing activities, $40,800 ($48,000 $7,200)

n. Net cash flow and June 30, 2007, cash balance, $5,600 ($14,800 $50,000$40,800)

30 Chapter 1 The Role of Accounting in Business

Spratlin Consulting

Statement of Cash Flows

For the Month Ended June 30, 2007

Cash flows from operating activities:

Cash received from customers $36,000

Deduct cash payments for operating expenses (k)

Net cash flows from operating activities $14,800

Cash flows from investing activities:

Cash payments for acquisition of land (l)

Cash flows from financing activities:

Cash received from issuing capital stock $48,000

Deduct dividends 7,200

Net cash flows from financing activities (m)

Net cash flow and June 30, 2007, cash balance $ (n)

SELF-STUDY QUESTIONS Answers at end of chapter

1. A profit-making business operating as a separate legal
   entity and in which ownership is divided into shares of
   stock is known as a:
   A. proprietorship. C. partnership.
   B. service business. D. corporation.


2. The resources owned by a business are called:
   A. assets.
   B. liabilities.

C. the accounting equation.

D. stockholders’ equity.

3. A listing of a business entity’s assets, liabilities, and
   stockholders’ equity as of a specific date is:
   A. a balance sheet.
   B. an income statement.
   C. the retained earnings statement.
   D. a statement of cash flows.