PROBLEM 1-30A Interrelationships among Financial Statements
O'Shea Enterprises started the 2002 accounting period with $30,000 of assets (all cash), $18,000 of liabilities,
and $4,000 of common stock. During the year, O'Shea earned cash revenues of $48,000, paid
cash expenses of $32,000, and paid a cash dividend to stockholders of $2,000. O'Shea also acquired$10,000 of additional cash from the sale of common stock and paid $6,000 cash to reduce the liability
owed to a bank.
a. Prepare an income statement, statement of changes in stockholders' equity, period-end balance sheet,
and statement of cash flows for the 2002 accounting period. (Hint: Determine the amount of beginning
retained earnings before considering the effects of the current period events. It also might help
to record all events under an accounting equation before preparing the statements.)
The solution explains how to prepare the financial statements given the transactions.