# Preparation of income statement, Balance sheet & cash flow

Chapter 2: Practice Exercise 2-14 - Expanded Accounting Equation
For the following four cases, use the expanded accounting equation to compute the missing
quantity.
Assets Liabilities Capital Stock Retained Earnings
Case A \$23,000 \$11,000 A \$ 4,500
Case B 17,500 B \$ 4,500 3,600
Case C C 14,000 11,000 27,000
Case D 45,000 29,000 18,000 D

Chapter 2: Exercise 2-25 - Balance Sheet Preparation
From the following data, prepare a classified balance sheet for Taylorsville Construction
Company at December 31, 2009.

Income Statement Computations
Following are the operating data for an advertising firm for the year ended December 31,
2009.
Accounts payable . . . . . . . . . . . . . . . . . . . . . . \$ 74,300
Accounts receivable . . . . . . . . . . . . . . . . . . . . . 113,500
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512,000
Owners' equity, 1/1/09 . . . . . . . . . . . . . . . . . . 314,300
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,600
Distributions to owners during 2009 . . . . . . . . 48,100
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,250
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
Mortgage payable . . . . . . . . . . . . . . . . . . . . . . 423,400
Net income for 2009 . . . . . . . . . . . . . . . . . . . . 109,450
Owners' equity, 12/31/09 . . . . . . . . . . . . . . . . ?

Chapter 2: Exercise 2-27 (Part 1 only) - Income Statement Preparation
The following selected information is taken from the records of Pickard and Associates.
1. Prepare an income statement for the year ended December 31, 2009. (Assume that
11,000 shares of stock are outstanding.)
Accounts payable . . . . \$143,000
Accounts receivable . . . . . \$95,000
Cash . . . . . \$63,000
Supplies expense . . . . . . . . . . . . . . . . . . . . . . . . 31,500
Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Utilities expense . . . . . . . . . . . . . . . . . . . . . . . . . 2,500
Income taxes (30% of
income before taxes) ?
Miscellaneous expense \$5,100
Owners' equity . . . . . . \$215,000
Salaries expense . . . . . . . . . . \$78,000
Fees (revenues) . . . . . . . . . . . . . . . . . . . . . . . . . \$476,000

Chapter 2: Exercise 2-29 - During 2009, Edgemont Corporation had revenues of \$230,000 and expenses, including
income taxes, of \$190,000. On December 31, 2008, Edgemont had assets of \$350,000,
liabilities of \$80,000, and capital stock of \$210,000. Edgemont paid a cash dividend of
\$25,000 in 2009. No additional stock was issued. Compute the retained earnings on
December 31, 2008, and 2009.

Chapter 2: Exercise 2-32 - Cash Flow Computations
From the following selected compute:
1. Net cash flow provided (used) by operating activities.
2. Net cash flow provided (used) by investing activities.
3. Net cash flow provided (used) by financing activities.
4. Net increase (decrease) in cash during the year.
5. The cash balance at the end of the year.
Cash receipts from:
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$270,000
Investments by owners . . . . . . . . . . . . . . . . . . . . . . . 54,000
Sale of building . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
Proceeds from bank loan . . . . . . . . . . . . . . . . . . . . . 60,000
Cash payments for:
Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$ 82,000
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,000
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Repayment of principal on loan . . . . . . . . . . . . . . . . . 40,000
Purchase of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,000
Cash balance at beginning of year . . . . . . . . . . . . . . . . \$386,000
Chapter 2: Exercise 2-33 -
For each of the following items, indicate whether it would be classified and reported under
the operating activities (OA), investing activities (IA), or financing activities (FA) section of a
statement of cash flows:
a. Cash receipts from selling merchandise
b. Cash payments for wages and salaries

Cash receipts from:
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$270,000
Investments by owners . . . . . . . . . . . . . . . . . . . . . . . 54,000
Sale of building . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000
Proceeds from bank loan . . . . . . . . . . . . . . . . . . . . . 60,000
Cash payments for:
Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$ 82,000
Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,000
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Repayment of principal on loan . . . . . . . . . . . . . . . . . 40,000
Purchase of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,000
Cash balance at beginning of year . . . . . . . . . . . . . . . . \$386,000

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Solution Summary

The answer contains solutions for six problems namely computation of expanded accounting equation, preparation of balance sheet, income statement, computation of retained earnings,preparation of cash flow statement and identification of operating, investing and financing activities from the list of transactions.

\$2.19