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Interrelationships Among Financial Statements - O'Shea

Interrelationships among Financial Statements

O'Shea Enterprises started the 2005 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.

CHECK FIGURES
a. Net Income: $16,000
b. Total Assets: $48,000

Required
1. Prepare an income statement, statement of changes in stockholders' equity, period-end balance sheet, and statement of cash flows for the 2005 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.)

Formatted financial statements are included to complete the problem.

O'Shea Enterprises
Income Statement
For the Year Ended December 31, 2005

Revenues $
Expenses
Net income $

O'Shea Enterprises
Statement of Changes in Stockholders' Equity
For the Year Ended December 31, 2005

Beginning Common stock $
Plus: Investments
Ending Common stock $

Beginning Retained Earnings $
Plus: Net Income
Less: Dividends
Ending Retained Earnings

Total Stockholders' Equity $

O'Shea Enterprises
Balance Sheet
As of December 31, 2005

Assets:
Cash $
Total Assets $

Liabilities:
Note payable $
Total Liabilities

Stockholders' Equity:
Common stock $
Retained Earnings ____________
Total Stockholders' Equity

Total Liabilities and Stockholders' Equity $

O'Shea Enterprises
Statement of Cash Flows
For the Year Ended December 31, 2005

Cash Flows from Operating Activities:
Cash Receipts from Revenue $
Cash Payments for Expenses
Net Cash Flow from Operating Activities $

Cash Flow from Investing Activities:

Cash Flows from Financing Activities:
Cash Receipts from Owners' Investments
Cash Receipts from Borrowed Funds
Cash Payments for Dividends
Net Cash Flow from Financing Activities

Net Increase in Cash $

Attachments

Solution Preview

The accounting equation work paper is attached in Excel.

O'Shea Enterprises
Income Statement
For the Year Ended December 31, 2005

Revenues $48,000
Expenses 32,000
Net income $16,000

O'Shea Enterprises
Statement of Changes in Stockholders' Equity
For the Year Ended December 31, 2005

Beginning Common stock $ 4,000
Plus: Investments ...

Solution Summary

The problem presents summarized data for the year 2005 for O'Shea Enterprises including check figures. The problem suggests posting events under an accounting equation layout. Blank financial statements are included for completion: balance sheet, income statement, statement of cash flows, and statement of changes in stockholders' equity.

$2.19