BB-Handout _2-Chapter 2

BB-Handout _2-Chapter 2 - Handout #2-Chapter 2 Example 1...

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Handout #2-Chapter 2 Example 1 – Preparing financial statements using account balances Nicole Company was formed on January 1, 2008. The following alphabetical list of information is taken from the accounting records on December 31, 2008: Account Title Amount Category Account payable $10,000 Liability Accounts receivable 12,000 Asset Advertising expense 14,000 Retained Earnings-expense Cash 17,000 Asset Common Stock (issued Jan 2, 2008) 80,000 Common Stock Consulting revenue 90,000 Retained Earnings Land 50,000 Rent expense 22,000 Supplies 4,000 Supplies expense 9,000 Trucks 20,000 Wages expense 36,000 Wages payable 4,000 Requirement 1: Categorize each of the above accounts as Asset, Liability, Common Stock, and Re- tained Earnings. If a general ledger account is classified as Retained Earnings, in- dicate whether that item is Revenue, Expense, or Dividends. 2-1
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Requirement 2: Compute each of the following: 1. Total revenues for year ended December 31, 2008. 2. Total expenses for year ended December 31, 2008. 3. Net income (loss) for year ended December 31, 2008. 4. Retained earnings on January 1, 2008. 5. Retained earnings on December 31, 2008. 6. Total owners’ equity on December 31, 2008. 7. Total assets on December 31, 2008. 8. Total liabilities on December 31, 2008. 9. Total liabilities and owners’ equity on December 31, 2008. 2-2
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Revenue Earned on Account Part A Barbara’s Fashion Consultants was started in 2010. During that year the company earned $5,000 of consulting revenue on account (no cash, money still owed, but it is on account) . Assume this is the only event experienced by Barbara’s Fashion Consultants during 2010. Required 1. Record the event under an accounting equation. 2. Prepare an income statement, a statement of retained earnings, a balance sheet, and a statement of cash flows for 2010. Part B During 2011, Barbara’s Fashion Consultants collected $5,000 cash from the account receivable it established in Part A. Assume that this was the only event experienced by Barbara’s Fashion Consultants in 2011. Required 1. Record the event under an accounting equation. 2. Prepare an income statement, a statement of retained earnings, a balance sheet, and a statement of cash flows for 2011. Demonstration Problem 2-1: Work Paper, part 1. Accounting Equation Assets = Liabilities + Equity Part A, 2010 Cash + Accts. Receiv. = Liabilities + Common Stock + Retained Earnings Beginning Balances $ -0- $ -0- $ -0- $ -0- $ -0- 1. Effect of Recognizing Rev. 5,000 5,000 Part B, 2011 1. Effect of Cash Collect. 5,000 (5,000) −−−−− −−−− −−−− −−−−− −−−−− Ending Balances
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This note was uploaded on 02/10/2011 for the course ACC 201 taught by Professor Cromartie during the Spring '11 term at UNC Greensboro.

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BB-Handout _2-Chapter 2 - Handout #2-Chapter 2 Example 1...

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