Question

Milea Inc, experienced the following events in 2018, Its first year of operations: 1. Received $15,000 cash from the issue of common stock. 2. Performed services on account for $45,000. 3. Paid the utility expense of $1,100. 4. Collected $32,920 of the accounts receivable. 5. Recorded $9,500 of accrued salaries at the end of the year. 6. Paid a $950 cash dividend to the stockholders. b. Prepare the income statement, statement of changes in stockholders' equilty, balance sheet, and statement of cash flows for the 2018 accounting period. Complete this question by entering your answers in the tabs below. Req B1 Req B2 Reg 13 Reg B4 Prepare the income statement. MILEA INC Income Statement For the Year Ended December 31, 2018 Common stock $ 15,000 Expenses Total expense 15.000

Answer 1

Credit Debit 15,000 $ Account name 1 Cash Common stock (to record issue of common stock for cash) $ 15,000 $ 45,000 $ 45,000 2 Accounts receivable Service revenue (to record service revenue earned and accounts receivable) 1,100 $ 1,100 3 Utility expense Cash (to record utility expense paid in cash)

$ 32,920 $ 32,920 4 Cash Accounts receivable (to record cash received from the accounts receivable) 9,500 $ 9,500 5 Salaries expense Accrued salaries (to record accrued salaries for the year) 950 $ 950 6 Dividends Cash (to record dividends payments to stockholders)

Ledgers:

Common stock Accounts receivable Cash account 15,000 Utility expense 32,920 Dividends Balance c/d 47,920 1,100 950 45,870 47,920 Balance c/d Common stock account 15,000 Cash 15,000 15,000 15,000

Service revenue Accounts receivable 45,000 Cash Balance c/d 45,000 32,920 12,080 45,000 45,000 Service revenue Accounts receivable 45,000 45,000 Balance c/d 45,000 Cash Utility expense 1,100 Balance c/d 1,100 1,100 1,100

Accrued salaries Salary expense 9,500 Balance c/d 9,500 9,500 9,500 9,500 Accrued salaries Salary expense 9,500 9,500 Balance c/d 9,500 Cash Dividend 950 Balance c/d 950 950 950

• Salary expense is accrued but not paid. Therefore, accrued salaries (a liability) is created.

Credit Trial Balance Accounts Debit Cash 45,870 Accounts receivable 12,080 Accrued salaries Common stock Dividend 950 Service revenue Salary expense 9,500 Utility expense 1,100 Totals 69,500 9,500 15,000 45,000 69,500

MILEA INC. Income Statement For the Year Ended December 31, 2018 Service revenue $ 45,000 Expenses Salary expense $ 9,500 Utility expense $ 1,100 Total expenses $ 10,600 Net income $ 34,400

MILEA INC. Statement of Changes in Stockholders' Equity For the Year Ended December 31, 2018 Beginning common stock $ Add: Issue of common stock $ 15,000 Ending common stock $ 15,000 Beginning retained earnings $ Add: Net income $ 34,400 Less: Dividends $ (950) Ending retained earnings $ 33,450 Total stockholders' equity $ 48,450

• Beginning balances are 0, since this is the first year of operation.

45,870 12,080 $ 57,950 MILEA INC. Balance Sheet As of December 31, 2018 Assets Cash $ Accounts receivable $ Total assets Liabilities Accrued salaries Stockholders equity Common stock $ Retained earnings $ Total stockholders' equity Total liabilities and stockholders' equity $ 9,500 15,000 33,450 $ $ 48,450 57,950

34,400 MILEA INC. Statement of Cash Flows For the Year Ended December 31, 2018 Cash flow from operating activities Net income $ Add: Increase in accrued salaries $ 9,500 Less: Increase in accounts receivable $ (12,080) $ Net cash flow from operating activities $ Cash flow from investing activities $ Cash flow from financing activities Payment of dividends $ (950) Issue of common stock $ 15,000 Net cash flow from financing activities $ Net change in cash $ Beginning cash balance Ending cash balance $ (2,580) 31,820 - 14,050 45,870 45,870