Total assets $ 40 32
Total liabilities $ 18 8
Calculate the net income (loss) for each situation
2. Assume that the A division of Alien Corporation experienced the following transactions during the year ended December 31, 2013 :
a.Suppose division A supplied copy services for a customer for the discounted price of $252,000. Under normal conditions they would have provided these services for $294,000. Other revenues totaled $59,000.
b. Salaries cost the division $20,000 to provide these services. The division had to pay employees overtime occasionally. Ordinarily, the salary costs for these services would have been $18,100.
c. All other expenses excluding income taxes, $249,000 for the year. Income tax expense was 33% of income before tax.
d. The A division has two operating subdivisions: basic retail and special contracts. Each subdivison is accounted for separately to indicate how well each if performing. However, the A division combines the statements of all subdivisions to show results for the A division as a whole.
e. Inflation affects the amounts that the a division must pay for copy machines. To show the affects of inflation, net income would drop by $5,000.
f. If the A division were to go out of business, the sale of its assets would bring in $141,000 in cash.
Prepare the A division's income statement for the year ended December 31,2013.
For items a through f, explain the accounting concept , assumption, or principle that provides guidance in accounting for the item. State how you have applied the concept, assumption or principle in preparing the income statement.
3. Andrea Hutchinson is a realtor. She organized her business as a corporation on August 16, 2013. The business received $75,000 cash from Hutchinson and issued common stock. Consider the following facts as of August August 31st 2013.
a. Hutchinson has $20,000 in her personal bank account and $74,000 in the business bank account.
b. Hutchinson owes $2,000 on a personal charge account with Banana Store.
c. Hutchinson acquired business furniture for $44,000 on August 24. Of this amount, the business owes $37,000 on accounts payable at August 31.
d. Office supplies on hand at the real estate office total $8,000.
e. Hutchinson's business owes $41,000 on a note payable for some land acquired for a total price of $115,000.
f. Hutchinson's business spent $24,000 for a Realty franchise, which entitles her to represent herself as an agent. Hometown Realty is a national affiliation of independent real estate agents. This franchise is a business asset.
g. Hutchinson owes $90,000 on a personal mortgage on her personal residence, which she acquired in 2003 for a total price of $420,000.
Prepare the balance sheet of the real estate business of Andrea Hutchinson Realtor Inc., at August 31, 2013.
Does it appear that the realty business can pay it's debts? How can you tell?
Identify the personal items given in the proceeding facts that would not be reported on the balance sheet of the business.
4. The following data come from the financial statements of The Fun in the Sun Company for the year ended May 31, 2013 (in millions).
Purchase of property, plant and equipment...$3,510
Adjustments to reconcile net income to net cash provided by operating activities...2,350
Cash beginning of the year $270, end of year...1,930
Cost of goods sold...37,550
Other investing cash payments...$185
Payment of dividends...290
Issuance of common stock...195
Sales of property, plant and equipment...50
Prepare a cash flow statement for the year ended May 31, 2013.
What activities provided the largest source of cash? Is this a sign of financial strength or weakness?
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