Susan’s Consulting experienced the following transactions for 2014, its first ye

Question

Susan’s Consulting experienced the following transactions for 2014, its first year of operations, and 2015. Assume that all transactions involve the receipt or payment of cash. Transactions for 2014 1. Acquired $80,000 by issuing common stock. 2. Received $130,000 cash for providing services to customers. 3. Borrowed $21,000 cash from creditors. 4. Paid expenses amounting to $54,000. 5. Purchased land for $40,000 cash. Transactions for 2015 Beginning account balances for 2015 are: Cash $ 137,000 Land 40,000 Notes payable 21,000 Common stock 80,000 Retained earnings 76,000 1. Acquired an additional $26,000 from the issue of common stock. 2. Received $136,000 for providing services. 3. Paid $16,000 to creditors to reduce loan. 4. Paid expenses amounting to $69,000. 5. Paid a $12,000 dividend to the stockholders. 6. Determined that the market value of the land is $50,000. Required a. Record the effects of each accounting event under the appropriate headings for each year. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide appropriate titles for these accounts in the last column of the table. (Enter any decreases to account balances with a minus sign. Select "NA" if there is no effect on the "Account Titles for Retained Earnings".) b-1. Prepare an income statement for each year accounting period. b-2. Prepare a statement of changes in stockholders’ equity for each year accounting period. b-3. Prepare a year-end balance sheet for each year accounting period. b-4. Prepare a statement of cash flows for each year accounting period. (Amounts to be deducted should be indicated with a minus sign.) c. Determine the amount of cash that is in the retained earnings account at the end of 2014 and 2015. e. Determine the balance in the Retained Earnings account immediately after Event 2 in 2014 and in 2015 are recorded.

Explanation / Answer

Trans. No Assets Amount Liabilites Amt Stockholder Equity Common stock Retained earnings 2014 Revenue Expenses Dividend Retained Earnings Balane Total 1 Cash 80000 80000 2 Cash 130000 130000 3 Cash 21000 Notes payable 21000 4 Cash -54000 54000 5 Cash -40000 Land 40000 Net Income An c 76000 Total   A 177000 21000 80000 130000 54000 76000 177000 2015 1 Cash 26000 26000 2 Cash 136000 136000 3 Cash -16000 Notes Pyable -16000 4 Cash -69000 69000 5 Cash -12000 12000 6 no effect Income Transferred to retained earnings 55000 Total B 65000 -16000 26000 136000 69000 12000 55000 65000 Balance as on 31 dec 2015 A+b 242000 5000 106000 266000 123000 12000 131000 242000 Income Statement 2014 2015 Revenue 130000 136000 Less: expenses 54000 69000 Net Income 76000 67000 Change In stockholder Equity 2014 2015 Opening balance of Sto. Equity 156000 Issue of Common Stock 80000 26000 Retained earnings 76000 67000 Less: Dividend paid -12000 Total 156000 237000 Balance sheet 2014 2015 Assets Cash 137000 202000 Land 40000 40000 Total assets 177000 242000 Liabilities Notespayable 21000 5000 Stockholder Equity 156000 237000 Total 177000 242000 Ans c Amount of cash in Retained earning 2014 76000 2015 55000 Ans e` Balance In retained earnings 131000

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