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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.

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

Paid dividends

-2900

Paid liability

-4000

Issued stock

6,300

Earned revenue

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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Prat Corp. started the 2018 accounting period with $29,000 of assets (all cash), $11,500 of liabilities,...

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