Question
In: Accounting
Prat Corp. started the 2018 accounting period with $29,000 of assets (all cash), $11,500 of liabilities,...
Prat Corp. started the 2018 accounting period with $29,000 of assets (all cash), $11,500 of liabilities, and $14,000 of common stock. During the year, the Retained Earnings account increased by $15,550. The bookkeeper reported that Prat paid cash expenses of $30,500 and paid a $2,900 cash dividend to the stockholders, but she could not find a record of the amount of cash that Prat received for performing services. Prat also paid $4,000 cash to reduce the liability owed to the bank, and the business acquired $6,300 of additional cash from the issue of common stock.
- a-1. Prepare an income statement for the 2018 accounting period.
- a-2. Prepare a statement of changes in stockholders’ equity for the 2018 accounting period.
- a-3. Prepare a period-end balance sheet for the 2018 accounting period.
- a-4. Prepare a statement of cash flows for the 2018 accounting period.
Solutions
Expert Solution
| Ques 1 | ||
| Income statement | ||
| Service revenue | 48,950 | |
| Less:expenses | 30500 | |
| Net income | 18,450 | |
| Ques 2 | ||
| Statement of changes is equity | ||
| Common stock-beginning | 14,000 | |
| Add:Issue of stock | 6,300 | |
| Common stock-ending balance | 20,300 | |
| Retained earnings:beginnig | 3,500 | |
| Add:net income | 18,450 | |
| Less:dividends | 2900 | |
| Retained earnings:closing | 19,050 | |
| Stockholders equity-ending balance | 39350 | |
| Ques 3 | ||
| Balance sheet | ||
| Assets | ||
| Cash | 46,850 | |
| Total assets | 46,850 | |
| Liabilties & stockholders equity | ||
| Liabilities | 7,500 | |
| Stockholders equity | 39350 | |
| Total Liabilties & stockholders equity | 46,850 | |
| Ques 4 | ||
| Cash flow statement | ||
| Cash flow from operating activities | ||
| Cash collected from customers | 48,950 | |
| Cash paid to suppliers | -4000 | |
| Cash paid to other vendors | -30500 | |
| net cash provided by operating activities | 14,450 | |
| Cash flow from investing activites | 0 | |
| Cash flow from financing activities | ||
| Dividends paid | -2900 | |
| Issue of common stock | 6,300 | |
| net cash provided by financing activities | 3,400 | |
| Net changes in cash | 17,850 | |
| Beginning cash balance | 29,000 | |
| Ending cash balance | 46850 | |
Explanations:
| Pratt Corp. | |||||||
| Accounting Equation | |||||||
| Assets | = | Liabilities | + | Stockholders' Equity | |||
| Cash | = | Liabilities | + | Common | + | Retained Earnings | |
| Stock | |||||||
| Beginning balances | 29,000 | = | 11,500 | 14,000 | 3,500 | ||
| Paid expenses | -30500 | -30500 | |||||
| Paid dividends | -2900 | -2900 | |||||
| Paid liability | -4000 | -4000 | |||||
| Issued stock | 6,300 | 6,300 | |||||
| Earned revenue | 48,950 | 48,950 | |||||
| 46,850 | = | 7,500 | + | 20,300 | + | 19,050 | |
| Increase in Retained Earnings | 15550 | ||||||
| Add: Expenses | 30500 | ||||||
| Add: Dividends | 2900 | ||||||
| Revenue | 48950 | ||||||
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