Question

Prat Corp. started the 2018 accounting period with $33,000 of assets (all cash). $13,500 of liabilities, and $8,000 of common stock. During the year, the Retained Earnings account increased by $10,550. The bookkeeper reported that Prat paid cash expenses of $27,500 and paid a $2,300 cash dividend to the stockholders, but she could not find a record of the amount of cash that Prat received for performing services. Prat also paid $6,000 cash to reduce the liability owed to the bank, and the business acquired $7,400 of additional cash from the issue of common stock. Problem 1-34 Part a Required (Hint: Determine the amount of beginning retained earnings before considering the effects of the current period events. It also might help to record all events under an accounting equation before preparing the statements.) a-1. Prepare an income statement for the 2018 accounting period. a-2. Prepare a statement of changes in stockholders' equity for the 2018 accounting period. a-3. Prepare a period-end balance sheet for the 2018 accounting period. 2-4. Prepare a statement of cash flows for the 2018 accounting period. Complete this question by entering your answers in the tabs below. Reg A1 Reg A3 Reg A4 Prepare a statement of changes in stockholders' equity for the 2018 accounting period, Prat Corp. Statement of Changes in Stockholders' Equity For the Year Ended December 31, 2018 Beginning common stock Ending common stock Beginning retained earnings Ending retained eamings Total stockholders' equity

Please answer and I will gladly give a thumbs up!

Answer 1

a) Firstly we need to calculate the cash received for service which is shown as follows:-

Prat Corp.

Accounting Equation (Amounts in $)

	Assets	=	Liabilities	+	Stockholders' Equity
	Cash	=	Liabilities	+	Common Stock	+	Retained Earnings
Beginning Balance	33,000	=	13,500	+	8,000	+	11,500 (Bal fig)*
Expenses Paid	(27,500)						(27,500)
Dividends Paid	(2,300)						(2,300)
Liabilities Paid	(6,000		(6,000)
Additional issue of stock	7,400				7,400
Revenue Earned (Bal fig)	40,350						40,350**
Ending Balance	44,950	=	7,500	+	15,400	+	22,050 (11,500+10,550)

*Beginning bal of retained earnings = Beg cash - Beg Liab - Beg Common Stock

= $33,000 - $13,500 - $8,000 = $11,500

**Ending balance of Retained Earnings = Beg Balance+Net Increase

= $11,500+$10,550 = $22,050

1) Income Statement for 2018 Accounting period (Amounts in $)

Revenues	40,350
Expenses	(27,500)
Net Income	12,850

2) Statement of changes in stockholders' equity (Amounts in $)

Prat Corp.
Statement of Changes in Stockholders' Equity
For The Year Ended December 31, 2018
Beginning common stock	8,000
Add: Issue of common stock	7,400
Ending common stock		15,400
Beginning retained earnings	11,500
Add: Net Income	12,850
Less: Dividends paid	2,300
Ending retained earnings		22,050
Total stockholders' equity		37,450

3) Prat Corp.

Balance Sheet as on Dec 31, 2018 (Amounts in $)

Assets
Cash	44,950
Total Assets	44,950
Liabilities and Stockholders' Equity
Liabilities	7,500
Stockholders' Equity	37,450
Total Liabilities and Stockholders' Equity	44,950

4) Statement of Cash Flows for the year ended Dec 31, 2018 (Amounts in $)

Cash Flows from Operating Activities
Cash received for revenue	40,350
Cash paid for expenses	(27,500)
Cash paid for liabilities	(6,000)
Net cash provided by operating activities (A)		6,850
Cash Flows from Investing Activities (B)		0
Cash Flows from Financing Activities
Issue of common stock	7,400
Dividends paid	(2,300)
Net cash provided by financing activities (C)		5,100
Net Increase in Cash (A+B+C)		11,950
Beginning Cash Balance		33,000
Ending Cash Balance		44,950