Cordell Inc. experienced the following events in 2018, its first year of operati
ID: 2333235 • Letter: C
Question
Cordell Inc. experienced the following events in 2018, its first year of operation: 1. Received $54,000 cash from the issue of common stock. 2. Performed services on account for $76,000. 3. Paid a $5,400 cash dividend to the stockholders. 4. Collected $60,000 of the accounts receivable. 5. Paid $54,000 cash for other operating expenses. 6. Performed services for $12,500 cash 7. Recognized $2,400 of accrued utilities expense at the end of the year. Required a. & c.Identify the events that result in revenue or expense recognition and those which affect the statement of cash flows. In the Statement of Cash Flows column, use OA to designate operating activityFA for financing activity, IA for investing activity and NA to indicate the element is not affected by the event. b. Based on your response to Requirement a, determine the amount of net income d. Based on your response to Requirement c, determine the amount of cash flow e. What is the before- and after-closing balance in the service revenue account? reported on the 2018 income statement. from operating activities reported on the 2018 statement of cash flows. f. What is the balance of the retained earnings account that appears on the 2018 balance sheet?Explanation / Answer
Requirement A & C
Event
Revenue
Expense
Statement of Cash Flow
1
$ 54,000.00
FA
2
$ 76,000.00
NA
3
$ -5,400.00
FA
4
$ 60,000.00
OA
5
$ 54,000.00
$ -54,000.00
OA
6
$ 12,500.00
$ 12,500.00
OA
7
$ 2,400.00
NA
Requirement B
Income Statement
Service Revenue
$ 88,500.00
Less: Operating Expenses (54000+2400)
$ 56,400.00
Net Income
$ 32,100.00
Requirement D
Cash Flow Statement (Partial)
Cash from Operating Activities
Net Income
$ 32,100.00
Adjustments to reconcile Net income with Operating Cash
Increase in Accounts Receivable (76000-60000)
$ (16,000.00)
Increase in Accrues liabilities
$ 2,400.00
$ (13,600.00)
Net cash from Operating Activities
$ 18,500.00
Requirement E
Before Closing balance
$ 88,500.00
After Closing Balance
$ 0
Service Revenue account will be Transferred to Income Summery and final balance will be zero
Requirement F
Retained earnings Account
Beginning Balance
$ -
Add: Net income earned
$ 32,100.00
Less: Dividends distributed
$ (5,400.00)
Ending balance In Retained earnings
$ 26,700.00
Answer Summery
b.
Net Income
$ 32,100.00
d.
Net cash from Operating Activities
$ 18,500.00
e.
Before Closing Balance
$ 88,500.00
After Closing Balance
$ 0
f.
Balance of Retained Earnings
$ 26,700.00
Event
Revenue
Expense
Statement of Cash Flow
1
$ 54,000.00
FA
2
$ 76,000.00
NA
3
$ -5,400.00
FA
4
$ 60,000.00
OA
5
$ 54,000.00
$ -54,000.00
OA
6
$ 12,500.00
$ 12,500.00
OA
7
$ 2,400.00
NA
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