Question

Use Excel for Problem 1-33 Interrelationships among financial statements

Crawford Enterprises started the 2014 accounting period with $75,000 of assets (all cash), $15,000 of liabilities, and $25,000 of common stock. During the year, Crawford earned cash revenues of $46,000, paid cash expenses of $26,000, and paid a cash dividend to stockholders of $5,000. Crawford also acquired $15,000 of additional cash from the sale of common stock and paid $10,000 cash to reduce the liability owed to a bank.

Required

a.Prepare an income statement, statement of changes in stockholders’ equity, period-end balance sheet, and statement of cash flows for the 2014 accounting period. (Hint: Determine the amount of beginning retained earnings before considering the effects of the current period events. It also might help to record all events under an accounting equation before preparing the statements.)

b.Determine the percentage of total assets that were provided by creditors, investors, and earnings.

c.Determine the balance in the Revenue, Expense, and Dividends accounts as of January 1, 2015.

Answer 1

Crawford Enterprises
Accounting period		2014
Statement of beginning position
Assets			75000
Total assets			75000
Liabilities			15000
Common Stock			25000
Retained earnings			35000
Totalliabilities and equity			75000
Transactions during the year:
			Debit	Credit
Cash			20000
Revenues				46000
Expenses			26000
(Year's transactions)
Dividends paid			5000
Cash				5000
(Dividend paid to stockholders)
Cash			15000
Common Stock				15000
(Additional common stock
issued for cash)
Liabilities			10000
Cash				10000
(Liability to bank
reduced by cash
payment)
a
Income statement for 2014
Revenues			46000
Expenses			26000
Net income			20000
Dividends paid			5000
Profit and loss account c/o			15000
Statement of changes in stockholders' equity
Opening balance:
Common Stock		25000
Retained earnings		35000	60000
Additional common stock issued			15000
Dividends paid			5000
Profit and loss account			15000
Closing balance			85000
Period end balance sheet
Assets
Beginning balances			75000
add
Net Revenue			20000
Additional Common Stock			15000	110000
less
Dividends			5000
Bank			10000	15000
Closing balances				95000
Liabilities & Equity
Common Stock				40000
Retained earnings				50000
Profit and loss account
Total equity				90000
Liabilities				5000
Total liabilities & equity				95000
Statement of cash flows			2014
Sources
Opening working capital			75000
Net revenue			20000
Additional Common Stock			15000	110000
Uses
Dividends			5000
Reduction of liability to bank			10000	15000
Closing working capital				95000
b
Total assets			95000
Percentage provided by creditors			5.26%
Percentage provided by investors			42.11%
Percentage provided by erarnings			52.63%
c
There would be no balances in these accounts as they are revenue items and have been closed.