Question

In: Accounting

As of January 1, 2018, Room Designs, Inc. had a balance of $4,800 in Cash, $2,650...

As of January 1, 2018, Room Designs, Inc. had a balance of $4,800 in Cash, $2,650 in Common Stock, and $2,150 in Retained Earnings. These were the only accounts with balances in the ledger on January 1, 2018. Further analysis of the company’s cash account indicated that during the 2018 accounting period, the company had (1) net cash inflow from operating activities of $5,250, (2) net cash outflow for investing activities of $13,300, and (3) net cash inflow from financing activities of $10,300. All revenue and expense events were cash events. The following accounts and balances represent the general ledger of Room Designs, Inc. as of December 31, 2018, before closing.

ROOM DESIGNS, INC.
General Ledger
Assets = Liabilities + Stockholders’ Equity
Cash Notes Payable Common Stock Revenue
Bal. 7,050 Bal. 4,500 Bal. 9,650 Bal. 10,200
Land Retained Earnings Expenses
Bal. 13,300 Bal. 2,150 Bal. 4,950
Dividends
Bal. 1,200

  

Required

a. Assume that the net cash inflow from financing activities of $10,300 was caused by three events. Based on the information above, identify these events and determine the cash flow associated with each event.

b. What did the company purchase that resulted in the cash outflow from investing activities?

c-1. Prepare an income statement for the year ended December 31, 2018.

c-2. Prepare a statement of changes in stockholders’ equity for the year ended December 31, 2018.

c-3. Prepare a balance sheet as of December 31, 2018.

c-4. Prepare a statement of cash flows for the year ended December 31, 2018.

Solutions

Expert Solution

A Financing activities
Common stock 7000 (9650-2650)
Notes payable 4500
Dividend paid -1200
Cash inflow from financing activities 10300
B
1 Income statement
Revenue 10200
Less Expense 4950
Net income 5250
2 Retained earnings
Beginning 2150
Add Net income 5250
7400
Less Dividends 1200
Ending balance 6200
3 Balance sheet
Assets
Cash 7050
Land 13300
Total assets 20350
Liabilities and stockholders equity
Notes payable 4500
Common stock 9650
Retained earnings 6200
Total liabilities and stockholders equity 20350
4 Cash flow statement
Cash inflow operating activities 5250
Cash outflow from investing activities -13300
Cash inflow from financing activities 10300
Net increase in cash and cash equivalent 2250 (5250-13300+10300)
Add Beginning cash and cash equivalent 4800
Ending cash and cash equivalent 7050

ekkarill92 answered 1 year ago
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