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Compute Value of Equity, Net Income, Retained Earnings

See the attached file.

2-1 Total Assets
Use the following information, compute total assets.

Equipment . . . . . . . . . . . . . . . $10,000
Accounts payable . . . . . . . . ....... 900
Capital stock . . . . . . . . . . . . .... 1,500
Cash . . . . . . . . . . . . . . . . . . ....... 800
Loan payable . . . . . . . . . . . . ....9,000
Wages payable . . . . . . . . . . . ......500
Accounts receivable . . . . . . . ....1, 000
Retained earnings . . . . . . . . . ....3, 400
Inventory . . . . . . . . . . . . . . . . ...3,500

2-2 Total Liabilities
Refer to the data in PE 2-1. Compute total liabilities.

2-3 Total Owners' Equity
Refer to the data in PE 2-1. Compute total owners' equity.

2-4 the Accounting Equation
For the following four cases, use the accounting equation to compute the missing quantity.

Assets Liabilities Owners' Equity
Case a $10,000 $ 4,000 A
Case B 8,000 B $3,500
Case C 5,500 7,000
Case D 13,000 15,000 D

2-5 Balance Sheets
Using the data in PE 2-1, prepare a balance sheet.

2-6 Current Assets
Using the following information, compute total current assets.

Land . . . . . . . . . . . . . . . . . . . . $7,000
Machinery . . . . . . . . . . . . . . . .. 1,300
Accounts payable . . . . . . . . ....1,600
Cash . . . . . . . . . . . . . . . . . . . . .....625
Buildings . . . . . . . . . . . . . . . ....7,500
Accounts receivable . . . . . . . ......800
Retained earnings . . . . . . . . . ...2,200
Inventory . . . . . . . . . . . . . . . . . . 2,100

2-7 Current Liabilities
Using the following information, compute total current liabilities.

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,000
Loan payable (due in 14 months) . . . . . . . . . . ... 1,100
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400
Mortgage payable (due in 30 years) . . . . . . . . . 10,000
Loan payable (due in 6 months) . . . . . . . . . . . . .....250
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . .....700
Retained earnings . . . . . . . . . . . . . . . . . . . . . . ....5,000

2-8 Book Value and Market Value of Equity
For the following four cases, compute (1) the book value of equity and (2) the market value of equity.

Assets Liabilities Number of Shares of Market Price
Stock Outstanding per Share
Case A $ 10,000 $ 4,000 1,000 $15
Case B 8,000 7,000 500 10
Case C 13,500 5,500 300 20
Case D 100,000 150,000 1,000 7

2-9 Total Revenues
Using the following information, compute total revenues. Caution: Not all of the items listed should be included in the computation of total revenues.

Cost of goods sold . . . . . . . $10,200 Wages payable . . . . . . . . $ 475
Interest revenue . . . . . . . . . . .....900 Accounts receivable . . . ... 950
Advertising expense . . . . . . ...2,150 Retained earnings . . . . . . 6,400
Cash . . . . . . . . . . . . . . . . . . ......700 Consulting revenue . . . . . 2,700
Sales . . . . . . . . . . . . . . . . . 13,600

2-10 Total Expenses
Using the data in PE 2-9, compute total expenses. Caution: Not all of the items listed should be included in the computation of total expenses.

2-11 Computation of Net Income
For the following four cases, compute net income (or net loss). Caution: Not all of the items listed should be included in the computation of net income.

Case a Case B Case C Case D
Cost of goods sold $ 60,000 $ 30,000 $60,000 $110,000
Interest expense 18,000 47,000 25,000 31,000
Cash 3,000 4,500 2,100 6,000
Retained earnings 50,000 15,000 31,000 70,000
Sales 100,000 150,000 70,000 200,000
Accounts payable 12,000 20,000 5,000 38,000
Rent revenue 5,000 1,000 12,000 10,000
Machinery 175,000 60,000 50,000 185,000

2-12 Income Statement
Using the following information, prepare an income statement.

Cost of goods sold . . . . . . . . . $ 7,300
Interest expense . . . . . . . . . . ... 1,200
Wage expense . . . . . . . . . . . ...... 900
Cash . . . . . . . . . . . . . . . . . . . . ....600
Sales . . . . . . . . . . . . . . . . . . . . 12,000
Accounts payable . . . . . . . . . . ...400
Accounts receivable . . . . . . . . ...750
Retained earnings . . . . . . . . . . . 3,300
Income tax expense . . . . . . . . . ...800
2-13 Computation of Ending Retained Earnings
For the following four cases, compute the ending amount of retained earnings. Caution: Not all of the items listed should be included in the computation of ending retained earnings.

Case a Case B Case C Case D
Capital stock $ 60,000 $ 30,000 $60,000 $110,000
Long-term loan payable 18,000 47,000 25,000 31,000
Dividends 3,000 4,500 2,100 6,000
Retained earnings
(beginning) 50,000 15,000 31,000 70,000
Inventory 100,000 150,000 70,000 200,000
Cash 12,000 20,000 5,000 38,000
Net income (loss) 5,000 1,000 12,000 (10,000)
Machinery 175,000 60,000 50,000 185,000

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

2-25 Balance Sheet Preparation
From the following data, prepare a classified balance sheet for Taylorsville Construction Company at 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 . . . . . . . . . . . . . . . .........?

2-27 Income Statement Preparation
The following selected information is taken from the records of Pickard and Associates.

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . $ 143,000
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . ....95,000
Advertising expense . . . . . . . . . . . . . . . . . . . . . . ....14,500
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

2-29 Retained Earnings Computations
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.

2-32 Cash Flow Computations
From the following selected data, 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

2-33 Cash Flow Classifications
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
c. Cash proceeds from sale of stock
d. Cash purchase of equipment
e. Cash dividends paid
f. Cash received from bank loan
g. Cash payments for inventory
h. Cash receipts from services rendered
i. Cash payments for taxes
j. Cash proceeds from sale of property no longer needed as expansion site.

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2-1 Total Assets
Use the following information, compute total assets
Equipment . . . . . . . . . . . . . . . $10,000
Accounts payable . . . . . . . . ....... 900
Capital stock . . . . . . . . . . . . .... 1,500
Cash . . . . . . . . . . . . . . . . . . ....... 800
Loan payable . . . . . . . . . . . . . ...9,000
Wages payable . . . . . . . . . . . ......500
Accounts receivable . . . . . . . ....1,000
Retained earnings . . . . . . . . . ....3,400
Inventory . . . . . . . . . . . . . . . . ...3,500
Name amount Type
Equipment $10,000.00 Asset $10,000.00
Accounts payable $900.00 Liabilities 0
Capital stock $2,500.00 Equity 0
Cash $800.00 Asset $800.00
Loan payable $9,000.00 Liabilities 0
Wages payable $500.00 Liabilities 0
Accounts receivable $1,000.00 Asset $1,000.00
Retained earnings $3,400.00 Equity 0
Inventory $3,500.00 Asset $3,500.00
Total assets $15,300.00

2-2 Total Liabilities
Refer to the data in PE 2-1. Compute total liabilities.
Name Amount Type
Equipment $10,000.00 Asset 0
Accounts payable $900.00 Liabilities $900.00
Capital stock $2,500.00 Equity 0
Cash $800.00 Asset 0
Loan payable $9,000.00 Liabilities $9,000.00
Wages payable $500.00 Liabilities $500.00
Accounts receivable $1,000.00 Asset 0
Retained earnings $3,400.00 Equity 0
Inventory $3,500.00 Asset 0
Total assets $10,400.00

2-3 Total Owners' Equity
Refer to the data in PE 2-1. Compute total owners' equity.
Name amount Type
Equipment $10,000.00 Asset 0
Accounts payable $900.00 Liabilities 0
Capital stock $2,500.00 Equity $2,500.00
Cash $800.00 Asset 0
Loan payable $9,000.00 Liabilities 0
Wages payable $500.00 Liabilities 0
Accounts receivable $1,000.00 Asset 0
Retained earnings $3,400.00 Equity $3,400.00
Inventory $3,500.00 Asset 0
Total assets $5,900.00
2-4 The Accounting Equation
For the following four cases, use the accounting equation to compute the missing quantity.

Assets Liabilities Owners' Equity
Case A $10,000 $ 4,000 A
Case B 8,000 B $3,500
Case C C 5,500 7,000
Case D 13,000 15,000 D

Accounting Equation: Assets = Equity + Liabilities
Assets Equity Liabilities
Case A $10,000.00 4,000 $6,000.00
Case B $8,000.00 $4,500.00 $3,500.00
Case C $12,500.00 5,500 $7,000.00
Case D $13,000.00 15,000 -$2,000.00

2-5 Balance Sheet
Using the data in PE 2-1, prepare a balance sheet.
Balance Sheet
Assets: Liabilities:
Cash $800.00 Accounts payable $900.00
Accounts receivable $1,000.00 Wages payable $500.00
Equipment $10,000.00 Loan payable $9,000.00
Inventory $3,500.00
Equity:
Capital stock $1,500.00
Retained earnings $3,400.00

$15,300.00 $15,300.00

2-6 Current Assets
Using the following information, compute total current assets.
Land . . . . . . . . . . . . . . . . . . . . $7,000
Machinery . . . . . . . . . . . . . . . .. 1,300
Accounts payable . . . . . . . . . . ..1,600
Cash . . . . . . . . . . . . . . . . . . . . .....625
Buildings . . . . . . . . . . . . . . . ....7,500
Accounts receivable . . . . . . . ......800
Retained earnings . . . . . . . . . ...2,200
Inventory . . . . . . . . . . . . . . . . . .2,100
Name Amount Type
Land $7,000.00 Fixed asset 0
Machinery $1,300.00 Fixed asset 0
Accounts payable $1,600.00 Current liabilities 0
Cash $625.00 Current assets $625.00
Buildings $7,500.00 Fixed asset 0
Accounts receivable $800.00 Current assets $800.00
Retained earnings $2,200.00 Equity 0
Inventory $2,100.00 Current assets $2,100.00
Current assets $3,525.00

2-7 Current Liabilities
Using the following information, compute total current liabilities.
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,000
Loan payable (due in 14 months) . . . . . . . . . . ... 1,100
Capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400
Mortgage payable (due in 30 years) . . . . . . . . . 10,000
Loan payable (due in 6 months) . . . . . . . . . . . . .....250
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . .....700
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . ...5,000
Name Amount Type
Inventory $9,000.00 Current assets 0
loan payable $1,100.00 Long-term liabilities 0
capital ...

Solution Summary

The expert computes the value of equity, net income and retained earnings. The total revenues are calculated.

$2.19