Question

Background Information: a) Donald Duck and Friends started their company when they issued 3,000 shares of $8 par value stock on January 1,2018

b) The stock issued at a market price of $13 per share

c) During the year, Donald Duck and Friends had revenue of $43,000

d) Donald Duck and Friends paid cash for $18,000 in expenses

e) Donald Duck and Friends paid a cash Dividend of $25,000

A B F G H I J C D E Donald Duck and Friends Income Statement For the Year Ended December 31,2018 $ 18 Revenue 19 Expense 20 Net Income 43,000 (18,000) 25,000 Hint: This is from transaction C Hint: This is from Transaction D $ b) Prepare a year-end balance Sheet Donald Duck and Friends Balance Sheet As of December 31, 2018 28 Assets Cash Hint: This is the sum of sale of stock (Transaction A & B) and also Transactions C-E $ 39,000 31 Total Assets 32 Liabilities 36 37 34 Total Liabilities 35 Stockholders Equity Common Stock Paid-in Capital in Excess of Par 38 Total Paid-Capital 39 Retained Earnings 40 Total Liabilities and Stockholders Equity Problem 5.1 Problem 5.2 Problem 53 Hint: This is from Transaction A Hint: This is from Transaction B $ 39,000 0 $ $ 39,000 Problem 54 Problem 5.5 Problem 5.6

Answer 1

First step would be compute cash on assets side

Balance Sheet
Assets
cash		39000
Total assets		39000
Total liabilities	0
Stockholders equity
Common stock (3000 * 10)	30000
Paid-in capital in excess of par	9000
Total paid in capital		39000
Retained earnings		NIL
Total liabilities and stockholders equity		39000

Working Note

Computation of cash

Cash receipts
Issuance of stock (13 * 3000)	39000
Revenue receipts	43000
	82000
Cash payments
Expenses	18000
Dividend	25000
	43000
Net cash	39000

The issuance of cash is done at market price of $ 13. Hence, whole of receipts is cash receipt

As per hint, revenue is assumed to cash revenue.

The expenses and dividend all are paid in cash