Question

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Preparing an Income Statement, Statement of Retained Earnings, and Balance Sheet and Interpreting the Financial Statements [LO 1-2, LO 1-3]

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Assume you are the president of High Power Corporation. At the end of the first year of operations (December 31), the following financial data for the company are available:

Accounts Payable	$	32,900
Accounts Receivable		10,750
Cash		14,100
Common Stock		59,890
Dividends		2,030
Equipment		87,000
Notes Payable		1,620
Operating Expenses		59,200
Other Expenses		7,930
Sales Revenue		92,400
Supplies		5,800

PA1-2 Part 2

1. 2-a. By how much did cash increase (decrease)?

1. 2-b. Which financial statement would report the business activities responsible for the change in cash?

• Income Statement

• Statement of Retained Earnings

• Balance Sheet

• Statement of Cash Flows

Answer 1

Answers

• Requirement 2a

--Its mentioned that this is the ‘first year’ of operation.
--Hence, beginning Cash balance = $ 0

--Ending cash balance = $ 14100

--INCREASE in Cash = $ 14,100 = Answer

• Requirement 2b
  Correct Answer = Option #4: Statement of Cash Flows is that financial statement where business activities responsible for the change in Cash are reported, classified under operating, investing and financing activities.