B. Determine the amount of net income reported on year 1 income statement? C. De
ID: 2337228 • Letter: B
Question
B. Determine the amount of net income reported on year 1 income statement?C. Determine the amount of cash flow from operating activities reported on the year 1 statement of cash flows?
D. What is the balance of the retained earnings account that appears on the year one balance sheet?
12 1. Received $40,000 cash from the issue of common stock 2. Performed services on account for $82,000. 3. Paid a $6,000 cash dividend to the stockholders. 4. Collected $76,000 of the accounts receivable. 5. Paid $53,000 cash for other operating expenses. 6. Performed services for $19,000 cash. 7. Recognized $3,500 of accrued utilities expense at the end of the year 10 points eBookRequired 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 activity, FA for financing activity, IA for investing activity and NA to indicate the element is not affected by the event. (Enter any decreases to account balances and cash outflows with a minus sign.) Prev 12 of 12
Explanation / Answer
A.&C. Events that result in revenue or expense recognition and those which affect the statement of cash flows in the statement of Cash Flows column:
Event
Revenue
Expense
Statement of Cash Flows
1
-
-
$40,000
IA, Increase
2
$82,000
-
-
-
3
-
-
$6,000
IA, Decrease
4
-
-
$76,000
OA, Increase
5
-
$53,000
-
-
6
$19,000
-
$19,000
OA, Increase
7
-
$3,500
-
-
Statement of Cash Flows (Partial)
Cash flow from operating activities:
Cash received from customers (decrease in accounts receivable balance)
$76,000
cash paid towards operating expenses
($53,000)
Services performed for Cash
$19,000
Cash flow from operating activities
$42,000
D. Balance of the retained earnings account that appears on the year 1 Balance Sheet:
Statement of Retained Earnings
Beginning balance
$0
Net Income
$44,500
Less: Dividends paid
($6,000)
Ending balance
$38,500
Computation of net income –
Income Statement
Service Revenue
services performed on account
$82,000
Services performed for cash
$19,000
$101,000
Less: Operating expenses
cash operating expenses
($53,000)
utilities expense
($3,500)
($56,500)
Net Income
$44,500
Event
Revenue
Expense
Statement of Cash Flows
1
-
-
$40,000
IA, Increase
2
$82,000
-
-
-
3
-
-
$6,000
IA, Decrease
4
-
-
$76,000
OA, Increase
5
-
$53,000
-
-
6
$19,000
-
$19,000
OA, Increase
7
-
$3,500
-
-
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