Question

Problem 1-35 Recording events in a horizontal statements model

CHECK FIGURES

a. Net Income: $23,000

e. Net Cash Flow from
Operating Activities: $23,000

Maben Company was started on January 1, 2018, and experienced the following events during its first year of operation:

Acquired $30,000 cash from the issue of common stock.

Borrowed $40,000 cash from National Bank.

Page 45

Earned cash revenues of $48,000 for performing services.

Paid cash expenses of $25,000.

Paid a $1,000 cash dividend to the stockholders.

Acquired an additional $20,000 cash from the issue of common stock.

Paid $10,000 cash to reduce the principal balance of the bank note.

Paid $53,000 cash to purchase land.

Determined that the market value of the land is $75,000.

Required

Record the preceding transactions in the horizontal statements model. Also, in the Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). The first event is shown as an example.

PROBLEM 1-35

a.

Maben Company Horizontal Statements Model for 2018

Balance Sheet

Income Statement

Statement of

Assets

=

Liab.

+

Stockholders’ Equity

Revenue

-

Expense

=

Net Inc.

Cash Flows

Event No.

Cash

+

Land

=

Notes Payable

+

Common Stock

+

Retained Earnings

1

30,000

+

NA

=

NA

+

30,000

+

NA

NA

-

NA

=

NA

30,000      FA

2

+

=

+

+

-

=

3

+

=

+

+

-

=

4

+

=

+

+

-

=

5.

+

=

+

+

-

=

6.

+

=

+

+

-

=

7.

+

=

+

+

-

=

8.

+

=

+

+

-

=

9.

+

=

+

+

-

=

Total

$

+

$

=

$

+

$

+

$

$

-

$

$

$

b. Total Assets = $         + $            = $

c.

Sources of Assets
	$
Total Sources of Assets	$

PROBLEM 1-35 (cont.)

d. Net income $                .

e.

Operating Activities:
Cash from revenue	$
Cash paid for expenses
Net Cash Flow from Operating Activities	$

Investing Activities:
	$
Net Cash Flow from Investing Activities	$

Financing Activities:
	$
Net Cash Flow from Financing Activities	$

f.       Percentage of assets is provided as follows:

          Investors            ($           ÷ $             )     . %

          Creditors            ($            ÷ $             )       . %

          Earnings             ($            ÷ $             )       . %

g.     

Answer 1

a .

Maben

company

Horizontal

Statement

Models

For

2018

Balance

Sheet

Income

Stateme

nt

statement of

Revenue

-

expenses

=

net income

cash flow

Event

cash

+

land

=

Note payable

+

common stock

+

retained earnings

1.

30000

+

NA

=

NA

+

30000

+

NA

NA

-

NA

=

NA

30000 FA

2 .

40000

+

NA

=

40000

+

NA

+

NA

NA

-

NA

=

NA

40000 FA

3.

48000

+

NA

=

NA

+

NA

+

48000

48000

-

NA

=

48000

48000 OA

4 .

(-)25000

+

NA

=

NA

+

NA

+

(-)25000

NA

-

25000

=

(-)25000

(-)25000 OA

5 .

(-)1000

+

NA

=

NA

+

NA

+

(-)1000

NA

-

NA

=

NA

(-)1000 FA

6.

20000

+

NA

=

NA

+

20000

+

NA

NA

-

NA

=

NA

20000 FA

7 .

(-)10000

+

NA

=

(-)10000

+

NA

+

NA

NA

-

NA

=

NA

(-)10000 FA

8.

(-)53000

+

53000

=

NA

+

NA

+

NA

NA

-

NA

=

NA

(-)53000 IA

TOTAL

49000

+

53000

=

30000

+

50000

+

22000

48000

-

25000

=

23000

49000

b . Total assets = $49000 (cash)+$53000(land) = $102000

c .

Sources of asset	amount
Note payable	30000
Common stock	50000
Retained earnings	22000
Total sources of assets	102000

d . Net income =$23000

e. Cash flow statement

Operating activities :	amount
Cash from revenue	48000
Cash paid for expenses	(25000)
Net cash flow from operating activities	23000
Investing activities :
Purchase of land	(53000)
Net cash flow from investing activities	(53000)
Financing activities :
Proceeds from issue of common stock	50000
Borrowing from bank	40000
Payment of div	(1000)
Repayment of bank borrowing	(10000)
Net cash from financing activities	79000
Net cash	49000

f . Percentage of asset provided as follows :-

Investors ($50000÷102000)= 49.02%

Creditors ($30000÷102000) = 29.41%

Earnings ($22000÷102000) = 21.57%