Question

prat corp. started the 2018 accounting period with $36000 of assets (all cash), $1500 liabilities, and $11000 of common stock. During the year, the Retained Earnings account increased by $ 13550. The book keeper reported that prat paid cash expenses of $29000 and paid a $2600 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 $9000 cash to reduce the liability owed to the bank, and the business acquired $8300 of additional cash from the issue of common stock.

Answer 1

Answer:

Assets Liabilities Liabilities Stockholder's equity Cash Common Stock Retained Earnings Beginning Balance Cash paid for expense Cash dividend paid Paid liabilities Stock issued Earned revenue Bank loan acquired (See Note) Ending balance $ 36,000 11,000 $ 23,500 1,500 (29,000) (29,000) (2,600) (2,600) (9,000) (9,000) 8,300 8,300 45,150 45,150 10,000 10,000 $ 2,500 $ 58,850 19,300 $ 37,050

Note: As it is given in the question that, Prat Corp. paid $9,000 to reduce the liability owned to the bank, It is assumed that Prat Corp. has acquired $10,000 bank loan during 2018.

PRAT CORP. Income Statement For the year ended December 31, 2018 Increase in retained earnings 13,550 Add: Expense 29,000 Add: Dividend 2,600 Revenue 45,150 %24

PRAT CORP. Statement of changes in Stockholder's Equity For the year ended December 31, 2018 Beginning common stock 11,000 Additional common stock issued 8,300 Ending common stock Beginning retained earnings 19,300 23,500 Net income 16,150 Dividend paid 2,600 Ending retained earnings 37,050 Total stockholder's equity 56,350

PRAT CORP. Balance Sheet As of December 31, 2018 Assets Cash 58,850 Total assets 58,850 Liabilities 2,500 Stockholder's equity Common stock 19,300 Retained earnings 37,050 Total stockholder's equity 56,350 Total liabilities and stockholder's equity 58,850 %24

PRAT CORP. Statement of Cash Flows For the year ended December 31, 2018 Cash from operating activities Cash payment for expense $ (29,000) Cash received from revenue earned 45,150 Net cash flow from operating activities Cash flow from investing activities Cash flow from financing activities 16,150 Cash dividend to stockholders (2,600) Cash received from stock issue 8,300 Bank loan paid Bank loan acquired (9,000) 10,000 Net cash flow from financing activities 6,700 Net increase in cash Plus: Beginning cash balance Ending cash balance 22,850 36,000 58,850