Chapter 1, P 6. 1.

Financial statements completed Set A Income Statement Revenue Expenses Net income Statement of Retained Earnings Beginning balance Net income Less dividends Ending balance Balance Sheet Total assets Liabilities Stockholders equity Common stock Retained earnings Total liabilities and stockholders equity 2. User Insight: Income statement discussed The income statement must be prepared first because the amount of net income is necessary to determine the ending balance of retained earnings. The ending balance of retained earnings is necessary for the preparation of the balance sheet. $2,700 (e) $ 400 (f) 200 2,100 $2,700 $26,000 $ 2,000 8,000 16,000 $26,000 (j) $1,900 $1,300 50 550 (q) $1,900 (r) $5,320 4,830 (a) $ 490 $1,800 490 (b) 190 (c) $2,100 (d) Set B $ 9,000 7,400 $ 1,600 $15,400 1,600 1,000 $16,000 Set C $2,350 (m) 1,900 $ 450 (n) $ 200 450 100 (o) $ 550 (p)

(g) (h)

(i)

(k) (l)

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Ch1 P6

Chapter 1, P 7. 1. Financial statements prepared Dodge Realty, Inc. Income Statement For the Year Ended December 31, 20x8 Revenue Commission sales revenue Expenses Commissions expense Marketing expense Office rent expense Supplies expense Telephone and computer expenses Wages expense Total expenses Income before income taxes Income taxes expense Net income Dodge Realty, Inc. Statement of Retained Earnings For the Year Ended December 31, 20x8 Retained earnings, December 31, 20x7 Net income for the year Subtotal Less dividends Retained earnings, December 31, 20x8 Dodge Realty, Inc. Balance Sheet December 31, 20x8 Assets Cash Accounts receivable Supplies Equipment Liabilities $ 65,750 Accounts payable $ 3,600 4,500 Income taxes payable 13,000 22,700 700 Commissions payable 59,900 Total liabilities Stockholders' Equity Common stock $ 15,000 76,550 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $450,000 $225,000 29,200 36,000 2,600 5,100 32,000 329,900 $120,100 38,850 $ 81,250

$ 35,300 81,250 $116,550 40,000 $ 76,550

$ 39,300

91,550 $130,850

Total assets

$130,850

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Ch1 P7 (1)

Chapter 1, P 7. (Continued) 2. User Insight: Useful statement identified The statement of cash flows is very useful in assessing whether a company's operations are generating sufficient funds to support expansion. The statement tells whether operations are producing enough cash or whether the company will need to obtain outside financing from creditors or owners.

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Ch1 P7 (2)

Chapter 1, P 8. 1. Financial statements prepared Creative Advertising, Inc. Income Statement For the Year Ended January 31, 20x7 Revenue Advertising service revenue Expenses Equipment rental expense Marketing expense Salaries expense Supplies expense Office rent expense Total expenses Income before income taxes Income taxes expense Net income Creative Advertising, Inc. Statement of Retained Earnings For the Year Ended January 31, 20x7 Retained earnings, January 31, 20x6 Net income for the year Subtotal Less dividends Retained earnings, January 31, 20x7 Creative Advertising, Inc. Balance Sheet January 31, 20x7 Assets Cash Accounts receivable Supplies $ 1,800 24,600 900 Liabilities Accounts payable $19,400 Income taxes payable 560 1,300 Salaries payable Total liabilities Stockholders' Equity Common stock $ 5,000 1,040 Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $159,200 $37,200 4,500 86,000 19,100 10,800 157,600 $ 1,600 560 $ 1,040

$ 1,040 $ 1,040 $ 1,040

$ 21,260

6,040 $ 27,300

Total assets

$27,300

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Ch1 P8 (1)

Chapter 1, P 8. (Continued) 2. User Insight: Financial challenges identified The company is challenged both in terms of profitability and liquidity. Profitability is low in that it has earned only $1,040 on revenues of $159,200. Liquidity is low because the company has cash of only $1,800 and liabilities of $21,260.

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Ch1 P8 (2)