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Internal Control System Objectives

Dale Company experienced the following events during 2004.
1. Acquired $30,000 cash from the issue of common stock.
2. Paid $12,000 cash to purchase land.
3. Borrowed $8,000 cash.
4. Provided services for $20,000 cash.
5. Paid $1,000 cash for rent expense.
6. Paid $12,000 cash for other operating expenses.
7. Paid a $2,000 cash dividend to the stockholders.
8. Determined that the market value of the land purchased in Event 2 is now $12,700.

Required (using excel)
a. The January 1, 2004, general ledger account balances are shown in the following accounting equation. Record the eight events in the appropriate general ledger accounts. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide the appropriate titles for these accounts in the last column of the table. The first event is shown as an example.

b. Prepare an income statement, statement of changes in equity, year-end balance sheet, and statement of cash flows for the 2004 accounting period.

c. Determine the percentage of assets that were provided by retained earnings. How much cash is in the retained earnings account?

QUESTIONS
2) Summarize the primary purposes of an internal control system.
3) What are the three internal control objectives for financial reporting?

Attachments

Solution Summary

This solution records the eight events in the general ledger accounts and prepares an income statement for equity, year-end sheet and the statement of cash flows. It also determines the percentage of assets in retained earnings and explains the primary purpose of an internal control system.

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