Question

Waddell Company had the following balances in its accounting records as of December 31, Year 1:

Waddell Company had the following balances in its accounting records as of December 31, Year 1: Assets Cash Accounts receivable Land Total $35,000 9,000 51,000 $95,000 Liabilities and Stk. Equity Accounts payable Common stock Retained earnings Total $ 7,500 40,000 47,500 $95,000 The following accounting events apply to Waddell Company's Year 2 fiscal year: Jan. 1 Acquired $20,000 cash from the issue of common stock. Mar. 1 Paid a $2,000 cash dividend to the stockholders. April 1 Purchased additional land that cost $15,000 cash. May 1 Made a cash payment on accounts payable of $5,500. Sept. 1 Sold land for $30,000 cash that had originally cost $30,000. Dec. 31 Earned $58,000 of service revenue on account during the year. 31 Received cash collections from accounts receivable amounting to $46,000. 31 Incurred other operating expenses on account during the year that amounted to $28,000. 31 The land purchased on April 1 had a market value of $20,000. Required Show the effects of the events on the financial statements using the following horizontal statements model. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC for net change in cash. a. What amount would Waddell report for land on the balance sheet? b. What amount of net cash flow from operating activities would be reported on the statement of cash flows? c. What amount of total liabilities would be reported on the balance sheet? d. What amount of net cash flow from investing activities would be reported on the statement of cash flows? e. What amount of total expenses would be reported on the income statement? f. What amount of service revenue would be reported on the income statement? g. What amount of cash flows from financing activities would be reported on the statement of cash flows? h. What amount of net income would be reported on the income statement? i. What amount of retained earnings would be reported on the balance sheet?

Answer 1

All Amount in $.

	Land Account
Particulars	Amount	Particulars	Amount
To Balance b/d	51000	By Sales	30000
To bank	15000	By Balance c/d	36000

b. Net cash flow from Operating Activities:

Particulars Amount

$

cash payment to accounts payable (5500)

Service Revenue 58000

Cash collections from Accounts Receivable 46000

Incurred Operating Expenses (28000)   

Cash flow from Opearting Activities 70500   

c. Amount of total liabilities reported on the Balance Sheet:

Particulars Amount

Accounts Payable 7500- 5500 2,000

Common Stock 40000+ 20000 60,000

Retained Earnings 47500+30000 (see point h) 77,500    

Total Liabilities    139,500      

which are here paid that less and which amount is received that will be Added.

d) Cash flow from Investing Activities:

Particulars Amount

Purchase of Land on 1 April (15,000)

sale of Land 30,000   

Net Cash flow from Investing Activities 15000

e. Expenses reported in Income Statement:

Amount

Operating Expenses 28,000

f. Amount of Service Revenue reported in Income Statement:

Service Revenue earned 58,000

g. Cash Flow from Financing Activities:

Issue of Common Stock 20,000

Cash Dividend paid ( 2,000)   

Cash flow from Financing Activities 18,000

h. Net Income reported in Income statement:

Service Revenue 58000

other operating expenses (28000)

Net Income 30,000

i. Retained Earnings in the Balance Sheet:

Retained Earnings already existed in the Balance sheet 46.500

Net Income 30,000   

Total Retained Earning in the Balance Sheet 76,500