Question

P1-5A. Statement of Stockholders’ Equity and Balance Sheet The following is balance sheet information

for Flush Janitorial Service, Inc., at the end of 2019 and 2018:

December 31, 2019 December 31, 2018

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,000 $ 18,000

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 44,000

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,000 62,000

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,000 92,000

Building, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 520,000

Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 77,000

Mortgage payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,000 205,000

Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,000 22,000

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420,000 420,000

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 0

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? ?

Required

a. Prepare a balance sheet as of December 31 of each year.

b. Prepare a statement of stockholders’ equity for 2019. (Hint: The increase in retained earnings is

equal to the net income less the dividend.

Answer 1

Req a:
Balance Sheet (31.03.19)							Balance Sheet (31.03.18)
Assets							Assets
Cash			50,000				Cash			44,000
Accounts receivable			78000				Accounts receivable			62000
Supplies			27000				Supplies			22000
Total current assets				155000			Total current assets				128000
Land			92000				Land			92000
Equipment -Net			75000				Equipment -Net			77000
Building -Net			500000				Building -Net			520000
Total Property plant and equipment				667000			Total Property plant and equipment				689000
Total Assets				822000			Total Assets				844000
Liabilities and Stockholder's Equity:							Liabilities and Stockholder's Equity:
Liabilities:							Liabilities:
Accounts Payable			17000				Accounts Payable			18000
Mortgage Payable			175000				Mortgage Payable			205000
Total Liabilities				192000			Total Liabilities				223000
Stockholder's equity:							Stockholder's equity:
Common Stock			420000				Common Stock			420000
Retained earnings (Bal. fig.)			210000				Retained earnings (Bal. fig.)			201000
Total Stockholder's equity				630000			Total Stockholder's equity				621000
Total Liabilities and Stockholder Equity				822000			Total Liabilities and Stockholder Equity				844000
Note: Here, the balance of Retained earnings is computed as a balancing figure i.e. Total assets - total liabilities - common stock capital.
Req b:
Computation of Net Income earned for the year:
Ending balance of Retained earnings					210000
Less: Beginning balance of Retained earnings					201000
Net Increase in Retained earnings					9000
Add: Dividend paid during the year					20000
Net income for the year					29000
Statement of Retained earnings:
Beginning balance of Retained earnings					201000
Add: Net income for the year					29000
Sub total					230000
Less: Dividend paid during the year					20000
Ending balance of Retained earnings					210000