Question

Exercise 1-15A Preparing an income statement and a balance sheet LO 1-7 

Majka Company was started on January 1, Year 1 During Year the company experienced the following three accounting events: (1 earned cash revenues of $31,000, 2) paid cash expenses of $14,000, and (3) paid a $2,300 cash dividend to its stockholders. These were the only events that affected the company during Year 1 

Required

 a. Record the effects of each accounting event under the appropriate general ledger account headings

 b. Prepare an income statement, statement of changes in stockholders' equity, and a balance sheet dated December 31 Year 1 for Majka Company

Answer 1

MAJKA COMPANY
Accounting Equation for Year 1
Event	Assets	=	Liabilities	+	Stockholders' Equity
	Cash	=		+	Common Stock	+	Retained Earnings
1	$31,000						$31,000
2	($14,000)						($14,000)
3	($2,300)						($2,300)
Ending Balance	$14,700						$14,700

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MAJKA COMPANY
Income Statement
For the Year Ended December 31, Year 1
Revenue	$31,000
Expense	($14,000)
Net income	$17,000

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MAJKA COMPANY
Statement of Changes in Stockholders' Equity
For the Year Ended December 31, Year 1
Beginning Common Stock	$0
Plus: Common Stock Issued	$0
Ending Common Stock		$0
Beginning retained earnings	$0
Plus: Net Income       [Refer income statement]	$17,000
Less: Dividends	($2,300)
Ending retained earnings		$14,700
Total stockholders equity		$14,700

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MAJKA COMPANY
Balance Sheet
As of December 31, Year 1
Assets
Cash               [Refer Accounting equation table]	$14,700
Total assets		$14,700
Liabilities		$0
Stockholders' Equity
Retained Earnings       [Refer accounting equation]	$14,700
Total Stockholders' Equity		$14,700
Total Liabilities and Stockholders' equity            [$0 + $14,700]		$14,700