Exercise 1-26A Prepare financial statements covering two accounting cycles LO 1-5, 1-6, 1-7, 1-8, 1-9, 1-10 Ortho Company experienced the following events during its first- and second-year operations: Year 1 Transactions: Acquired $68,000 cash from the issue of common stock. Borrowed $36,000 cash from the National Credit Union. Earned $59,000 of cash revenue. Incurred $43,000 of cash expenses. Paid a $7,000 cash dividend. Paid $37,000 cash to purchase land. Year 2 Transactions: Acquired $50,000 cash from the issue of common stock. Borrowed $20,000 cash from the National Credit Union. Earned $85,000 of cash revenue. Incurred $62,000 of cash expenses. Paid a $2,000 cash dividend. Paid $25,000 cash to purchase land.
Solving first five questions
Ortho Company | ||||||||||
Accounting Equation for Year 1 | ||||||||||
Assets | Liabilities | Shareholder's equity | ||||||||
Event | Cash | + | Land | = | Notes payable | + | Common Stock | + | Retained earnings | Account tites for retained earnings |
$ | $ | $ | $ | $ | ||||||
Beginning balance | ||||||||||
Issue stock | 68000 | 68000 | ||||||||
Loan | 36000 | 36000 | ||||||||
Cash revenue | 59000 | 59000 | Net profit | |||||||
Cash Expense | -43000 | -43000 | Net profit | |||||||
Cash dividend | -7000 | -7000 | Dividend paid | |||||||
Land purchase | -37000 | 37000 | ||||||||
Total | 76000 | 37000 | 36000 | 68000 | 9000 |
Ortho Company | ||||||||||
Accounting Equation for Year 2 | ||||||||||
Assets | Liabilities | Shareholder's equity | ||||||||
Event | Cash | + | Land | = | Notes payable | + | Common Stock | + | Retained earnings | Account tites for retained earnings |
$ | $ | $ | $ | $ | ||||||
Beginning balance | 76000 | 37000 | 36000 | 68000 | 9000 | |||||
Issue stock | 50000 | 50000 | ||||||||
Loan | 20000 | 20000 | ||||||||
Cash revenue | 85000 | 85000 | Net profit | |||||||
Cash Expense | -62000 | -62000 | Net profit | |||||||
Cash dividend | -2000 | -2000 | Dividend paid | |||||||
Land purchase | -25000 | 25000 | ||||||||
Total | 142000 | 62000 | 56000 | 118000 | 30000 |
ORTHO COMPANY | |||
Income statement | |||
For the year ended Decemebr 31, Year 1 & Year 2 | |||
Year 1 | Year 2 | ||
$ | $ | ||
Revenue | 59000 | 85000 | |
Less: Expenses | 43000 | 62000 | |
Net profit | 16000 | 23000 |
ORTHO COMPANY | ||
Statement of changes in Stockholder's equity | ||
For the period ended Decemebr 31, Year 1 & Year 2 | ||
Year 1 | Year 2 | |
$ | $ | |
Beginning common stock | 0 | 68000 |
Add: Issued during the year | 68000 | 50000 |
Ending common stock | 68000 | 118000 |
Beginning retained earnings | 0 | 9000 |
Add: Net profit during the year | 16000 | 23000 |
Less: Dividend paid | -7000 | -2000 |
Ending retained earnings | 9000 | 30000 |
Total Stockholder's equity | 77000 | 148000 |
ORTHO COMPANY | ||
Balance Sheet | ||
For the period ended Decemebr 31, Year 1 & Year 2 | ||
Year 1 | Year 2 | |
$ | $ | |
Assets | ||
Land | 37000 | 62000 |
Cash | 76000 | 142000 |
Total Assets | 113000 | 204000 |
Liabilities | ||
Notes payable | 36000 | 56000 |
Stockholder's equity | ||
Common stock | 68000 | 118000 |
Retained earnings | 9000 | 30000 |
Total Stockholder's equity | 77000 | 148000 |
Total liabilities abd Stockholder's equity | 113000 | 204000 |
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