Worksheet 1 (with solution) PDF

Preview

Summary

In-class assignment (Wortham Services)...

Description

Lesson 1 – Worksheet - Financial Statements On December 31, Wortham Services reports the following year-end amounts. Assets:

Liabilities:

Cash

$11,000

Accounts receivable

19,000

Buildings

32,000

Salaries payable Notes payable

Revenues:

Service

Expenses:

Advertising

12,000

Insurance

18,000

Salaries

44,000

5,000 20,000

$85,000

Additional information: a. The balance of retained earnings at the beginning of the year is $6,000. b. The company pays dividends of $5,000 on December 31. c. Common stock is $20,000 at the beginning of the year, and $5,000 of additional shares are issued during the year. Required: Prepare the (1) income statement, (2) statement of stockholders’ equity, and (3) balance sheet.

1. Income statement:

2. Statement of stockholders’ equity:

Wortham Services

Wortham Services

Income Statement

Statement of Stockholders’ Equity

Year ended Dec. 31

Year ended Dec. 31

Net Income

$11,000

Common

Retained

Stock

Earnings

Beginning

$20,000

$ 6,000

Ending

$25,000

$12,000

3. Balance sheet: Wortham Services Balance Sheet December 31 Assets

Liabilities

Stockholders’ Equity Common stock Retained earnings Total assets

$62,000

Total liabilities and equity

$62,000

Solution: 1. Income statement:

2. Statement of stockholders’ equity:

Wortham Services

Wortham Services

Income Statement

Statement of Stockholders’ Equity

Year ended Dec. 31

Year ended Dec. 31

Service Revenue

85,000

Beginning

Common

Retained

Stock

Earnings

$20,000

Advertising

(12,000)

Share issue

Insurance

(18,000)

Net Income

Salaries

(44,000)

Dividends

Net Income

$11,000

$ 6,000

5,000 11,000 (5,000)

Ending

$25,000

$12,000

3. Balance sheet: Wortham Services Balance Sheet December 31 Assets

Liabilities

Cash

11,000

Salaries Payables

Accounts Receivable

19,000

Notes Payables

Buildings

32,000

Total assets

$62,000

5,000 20,000

Stockholders’ Equity Common stock

25,000

Retained earnings

12,000

Total liabilities and equity

$62,000...