Question

The following information for the year ended December 31, 2016, was reported by Nice Bite, Inc.

Accounts Payable	$	49,000
Accounts Receivable		26,800
Cash (balance on January 1, 2016)		103,900
Cash (balance on December 31, 2016)		90,000
Common Stock		156,500
Dividends		0
Equipment		140,700
Income Tax Expense		10,500
Interest Expense		29,900
Inventory		17,600
Notes Payable		27,600
Prepaid Rent		7,400
Office Expense		14,700
Retained Earnings (beginning)		8,300
Salaries and Wages Expense		36,100
Service Revenue		145,800
Utilities Expense		25,500
Salaries and Wages Payable		12,000

Other cash flow information:
Cash from issuing common stock	$	25,000
Cash paid to reacquire common stock		28,100
Cash paid for income taxes		11,400
Cash paid to purchase long-term assets		56,400
Cash paid to suppliers and employees		88,000
Cash received from customers		145,000

Required:

1. Prepare an income statement for 2016.

2. Prepare a statement of retained earnings for 2016.

3. Prepare a balance sheet for 2016.

4. Prepare a statement of cash flows for 2016. (Cash outflows should be entered as negative amounts.)

5. 5-a. What amount of total assets have been financed by the creditors and by the stockholders?

   Financed by Creditors ______ Financed by Stockholders _________
   
   5-b. Did Nice Bite rely more on creditors or stockholders for its financing at December 31, 2016?

   1. Creditors

   2. Stockholders

5-c. What is your information source?

1. Income Statement

2. Statement of Retained Earnings

3. Balance Sheet

4. Statement of Cash Flows
   
   2-a. What is the amount of retained earnings as of December 31, 2016?

2-b. Did the retained earnings at December 31, 2016, arise primarily from current year earnings or earnings retained from prior years?

• Arise primarily from current year earnings.

• Earnings retained from prior years.

• Approximately equal amounts of both.
  
  
  2-c. What is your information source?

• Income Statement

• Statement of Retained Earnings

• Balance Sheet

• Statement of Cash Flows

Answer 1

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Nice Bite, Inc.
Answer 1
Income Statement	Amount $
Service Revenue	145,800.00
Total Revenue	145,800.00
Less: Expenses
Office Expense	14,700.00
Salaries and Wages Expense	36,100.00
Utilities Expense	25,500.00
Interest Expense	29,900.00
Total Expenses	106,200.00
Income before tax	39,600.00
Income Tax Expense	10,500.00
Net Income	29,100.00
Answer 2
Statement of Retained Earnings	Amount $
Opening balance	8,300.00
Add: Net Income	29,100.00
Less: Dividends	-
Closing balance	37,400.00
Answer 3
Balance Sheet
Current Assets	Amount $
Cash	90,000.00
Accounts Receivable	26,800.00
Inventory	17,600.00
Prepaid rent	7,400.00
Current Assets	141,800.00
Plant, Property & Equipment
Equipment	140,700.00
Total Assets	282,500.00
Liabilities
Current Liabilities
Accounts Payable	49,000.00
Salaries and Wages Payable	12,000.00
Current Liabilities	61,000.00
Non Current Liabilities
Notes Payable	27,600.00
Non Current Liabilities	27,600.00
Total Liabilities	88,600.00
Stockholder's Equity
Common Stock	156,500.00
Retained Earnings	37,400.00
Total Stockholder's Equity	193,900.00
Total Liabilities & Stockholder's Equity	282,500.00
Answer 4
Cash Flow Statement	Amount $
Cashflow from operating activities
Cash received from customers	145,000.00
Cash paid to suppliers and employees	(88,000.00)
Cash paid for income taxes	(11,400.00)
Cashflow from operating activities	45,600.00
Cash Flow from Investing Activities
Cash paid to purchase long-term assets	(56,400.00)
Cash Flow from Investing Activities	(56,400.00)
Cash Flow from Financing Activities
Cash from issuing common stock	25,000.00
Cash paid to reacquire common stock	(28,100.00)
Cash Flow from Financing Activities	(3,100.00)
Net change in cash	(13,900.00)
Add: Beginning Cash Balance	103,900.00
Ending cash Balance	90,000.00

Answer 5 a

Total liabilities is $ 88,600. So Asset financed by creditors is $ 88,600.

Total Stockholder's Equity is $ 193,900. So Asset finance by Stockholders is $ 193,900

Answer 5 b

Nice Bite relied more on stockholders than creditors for its financing because contribution from stockholders is more.

Answer 5 c

The information source is Balance Sheet and Statement of Cash Flows.

Answer 2 a

The amount of retained earnings as of December 31, 2016 is $ 37,400.

Answer 2 b

the retained earnings at December 31, 2016, arise primarily from current year earnings because opening retained earnings was only $ 8,300 but current year income of $ 29,100 increased it to $ 37,400.

Answer 2 c

The information source is Statement of Retained Earnings.