Recording events in a horizontal statements model Maben Company was started on J
ID: 2553650 • Letter: R
Question
Recording events in a horizontal statements model
Maben Company was started on January 1, 2018, and experienced the following events during its first year of operation:
1. Acquired $30,000 cash from the issue of common stock.
2. Borrowed $40,000 cash from National Bank.
3. Earned cash revenues of $48,000 for performing services.
4. Paid cash expenses of $25,000.
5. Paid a $1,000 cash dividend to the stockholders.
6. Acquired an additional $20,000 cash from the issue of common stock.
7. Paid $10,000 cash to reduce the principal balance of the bank note.
8. Paid $53,000 cash to purchase land.
9. Determined that the market value of the land is $75,000.
Explanation / Answer
Solution
(a) Maben Company
Horizontal statements model for 2018
Event No.
Balance Sheet
Income Statement
Statement of cash flows
Cash
+
Land
=
N.Pay
+
C.Stock
+
Ret. Ear.
Rev.
-
Exp.
=
Net Inc.
1.
30,000
+
NA
=
NA
+
30,000
+
NA
NA
-
NA
=
NA
30,000 FA
2.
40,000
+
NA
=
40,000
+
NA
+
NA
NA
-
NA
=
NA
40,000 FA
3.
48,000
+
NA
=
NA
+
NA
+
48,000
48,000
-
NA
=
48,000
48 ,000 OA
4.
(25,000)
+
NA
=
NA
+
NA
+
(25,000)
NA
-
25,000
=
(25,000)
(25,000) OA
5.
(1,000)
+
NA
=
NA
+
NA
+
(1,000)
NA
-
NA
=
NA
(1,000) FA
6.
20,000
+
NA
=
NA
+
20,000
+
NA
NA
-
NA
=
NA
20,000 FA
7.
(10,000)
+
NA
=
(10,000)
+
NA
+
NA
NA
-
NA
=
NA
(10,000) FA
8.
(53,000)
+
53,000
=
NA
+
NA
+
NA
NA
-
NA
=
NA
(53,000) IA
9.
NA
+
NA
=
NA
+
NA
+
NA
NA
-
NA
=
NA
NA
Total
49,000
+
53,000
=
30,000
+
50,000
+
22,000
48,000
-
25,000
=
23,000
49,000
Net Cash (NC)
(b)The amount of total assets that Maben would report on the December 31, 2018, balance sheet.
Total Assets = Cash + Land = $ 49,000 + $ 53,000= $ 102,000 (Answer)
(c) Identify the asset source transactions and related amounts for 2018.
Asset source Transactions
Related Amounts ($)
1. Acquired cash from the issue of common stock
30,000
2. Borrowed cash from National Bank.
40,000
3. Earned cash revenues for performing services.
48,000
6. Acquired additional cash from the issue of common stock.
20,000
Total sources of assets
138,000
(d) Net income that Maben would report on the 2018 income statement. Explain why dividends do not appear on the income statement.
Net Income = Revenues –Expenses = $ 48,000 - $ 25,000 = $ 23,000 (Answer)
Dividends are not expenses instead dividends are appropriation of profits or net income. So, they do not appear on the income statement.
(e) The net cash flows from operating activities, financing activities, and investing activities that Maben would report on the 2018 statement of cash flows.
Net Cash Flows from Operating Activities
= Revenues –Expenses
=$ 48,000 -$ 25,000
=$ 23,000 (Answer)
Net Cash Flows from Financing Activities
= Issue of common stock + Borrowing from National Bank – Paid cash dividend –Paid principal balance of bank note+ Additional Issue of common stock
=$ 30,000 +$ 40,000 -$ 1,000 -$ 10,000 + $ 20,000
=$ 79,000 (Answer)
Net Cash Flows from Investing Activities
=Purchased land for cash
=$(53,000) Answer
(f) The percentage of assets that were provided by investors, creditors, and earnings. Round to three decimal places.
Balances from Horizontal statements model
Total Assets= $ 102,000
Notes Payable =$ 30,000
Common Stock=$ 50,000
Retained Earnings =$ 22,000
Net Income= $ 23,000
Providers
Percentage Of Assets (%)
1. Investor = $ 50,000 / $ 102,000 X 100
49.019
2. Creditors=$ 30,000 / $ 102,000 X 100
29.412
3. Earnings =($ 23,000 - $ 1000*) / $ 102,000 X 100
21.569
100
Dividend is paid in cash out of business earnings, so the amount of dividend paid will be deduced from net income.
(g) What is the balance in the Retained Earnings account immediately after Event 3 is recorded?
$ 0 (Zero).
Explanation: The revenue is recorded in a revenue account not in the retained earnings account and the balance in the revenue account is transferred to retained earnings account only at the end of the accounting period.
Good Luck.
Event No.
Balance Sheet
Income Statement
Statement of cash flows
Cash
+
Land
=
N.Pay
+
C.Stock
+
Ret. Ear.
Rev.
-
Exp.
=
Net Inc.
1.
30,000
+
NA
=
NA
+
30,000
+
NA
NA
-
NA
=
NA
30,000 FA
2.
40,000
+
NA
=
40,000
+
NA
+
NA
NA
-
NA
=
NA
40,000 FA
3.
48,000
+
NA
=
NA
+
NA
+
48,000
48,000
-
NA
=
48,000
48 ,000 OA
4.
(25,000)
+
NA
=
NA
+
NA
+
(25,000)
NA
-
25,000
=
(25,000)
(25,000) OA
5.
(1,000)
+
NA
=
NA
+
NA
+
(1,000)
NA
-
NA
=
NA
(1,000) FA
6.
20,000
+
NA
=
NA
+
20,000
+
NA
NA
-
NA
=
NA
20,000 FA
7.
(10,000)
+
NA
=
(10,000)
+
NA
+
NA
NA
-
NA
=
NA
(10,000) FA
8.
(53,000)
+
53,000
=
NA
+
NA
+
NA
NA
-
NA
=
NA
(53,000) IA
9.
NA
+
NA
=
NA
+
NA
+
NA
NA
-
NA
=
NA
NA
Total
49,000
+
53,000
=
30,000
+
50,000
+
22,000
48,000
-
25,000
=
23,000
49,000
Net Cash (NC)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.