Question

The following accounting events apply to Waddell Company's Year 2 fiscal year: Jan. 1 Acquired $52,000 cash from the issue of common stock. Feb. 1 Paid $5,400 cash in advance for a one-year lease for office space. Mar. 1 Paid a $1,800 cash dividend to the stockholders. Apr. 1 Purchased additional land that cost $31,000 cash. May 1 Made a cash payment on accounts payable of $21,000. July 1 Received $8,800 cash in advance as a retainer for services to be performed monthly over the coming year. Sept. 1 Sold land for $22,000 cash that had originally cost $22,000. Oct. 1 Purchased $1,010 of supplies on account. Dec. 31 Earned $61,000 of service revenue on account during the year. 31 Received cash collections from accounts receivable amounting to $59,000. 31 Incurred other operating expenses on account during the year that amounted to $11,000. 31 Recognized accrued salaries expense of $4,500. 31 Had $130 of supplies on hand at the end of the period. 31 The land purchased on April 1 had a market value of $40,000. Required Based on the preceding information, answer the following questions for Waddell Company. All questions pertain to the Year 2 financial statements. (Hint Enter items in general ledger accounts under the accounting equation before answering the questions.) 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 rent expense would be reported on the income statement? d. What amount of total liabilities would be reported on the balance sheet? e. What amount of supplies expense would be reported on the income statement? f. What amount of unearned revenue would be reported on the balance sheet? g. What amount of net cash flow from investing activities would be reported on the statement of cash flows? h. What amount of total expenses would be reported on the income statement? i. What amount of service revenue would be reported on the income statement? j. What amount of cash flows from financing activities would be reported on the statement of cash flows? k. What amount of net income would be reported on the income statement? 1. What amount of retained earnings would be reported on the balance sheet?

Answer 1

a. 40000 b. 41400 c. 4950 d. 27910 880 e. f. Land Net Cashflows from Operating Activities Rent Expense Total Liabilities Supplies Expense Unearned Revenue Net Cashflows from Investing Activities Total Expenses Service Revenue Net Cashflows from Financing Activities Net Income Retained Earnings 4400 -9000 h. 21330 65400 50200 i. j. k. I. 44070 58270

Waddell Company Worksheet For the Period ending Year 2 Journal Enteries Date Particulars Jan-01 Cash a/c Dr. To Common Stock (Common stock issued for cash) Debit in $ Credit in $ 52000 52000 Dr. 5400 Feb-01 Prepaid Rent a/c To Cash (12 months lease) 5400 Mar-01 Dr. 1800 Cash Dividend a/c To Cash (Dividend paid) 1800 Particulars Cash Interest Receivable Accounts Receivable Prepaid Rent Supplies Land Accounts Payable Unearned Revenue Salary Payable Common Stock Retained Earnings Cash Dividend Interest Revenue Service Revenue Operating Expense Salaries Expense Supplies Expense Rent Expense Total Unadjusted Adjustments Adjusted Debit in $ Credit in $ Debit in $ Credit in $ Debit in $ Credit in $ 132600 132600 0 49000 49000 5400 4950 450 1010 880 130 40000 40000 8010 11000 19010 8800 4400 4400 4500 4500 136000 136000 16000 16000 1800 1800 0 61000 4400 65400 11000 11000 4500 4500 880 880 4950 4950 229810 229810 25730 25730 245310 245310 Dr. 31000 Apr-01 Land a/c To Cash (Land purchased) 31000 Dr. 21000 May-01 Accounts Payable a/c To Cash (Creditors paid) 21000 Jul-01 8800 Cash a/c Dr. To Unearned Revenue (Advance from client) 8800 Statement of Income For the Period ending Year 2 Interest Revenue Service Revenue Total Liabilities Accounts Payable Unearned Revenue Salary Payable Dr. 22000 Sep-01 Cash a/c To Land (Land sold) 19010 4400 4500 27910 0 65400 65400 22000 1010 Oct-01 Supplies a/c Dr. To Accounts Payable (Supplies on account) 1010 Less: Operating Expense Salaries Expense Supplies Expense Rent Expense Net Income 11000 4500 880 4950 21330 44070 61000 Dec-31 Accounts Receivable a/c Dr. To Service Revenue (Services on account) 61000 Statement of Retained Earnings For the Period ending Year 2 Beginning Balance Net Income 59000 Dec-31 Cash a/c Dr. To Accounts Receivable (Cash received from debtors) 59000 16000 44070 60070 -1800 58270 Cash Dividend Adjusting Enteries Date Particulars Dec-31 Operating Expense a/c To Accounts Payable (Expense on account) Dr. Debit in $ Credit in $ 11000 11000 44070 Dr. 4500 Dec-31 Salaries Expense a/c To Salary Payable (Salary accrued) 4500 Statement of Cashflows For the Period ending Year 2 Cashflow from Operating Activity Net Income Adjustments: Increase in Accounts Receivable -2000 Increase in Prepaid Rent -450 Increase in Supplies - 130 Decrease in Accounts Payable -8990 Increase in Unearned Revenue 4400 Increase in Salary Payable 4500 Cash generated from Operating Activity 880 Dec-31 Supplies Expense a/c Dr. To Supplies (Supplies expensed) 1010 - 130 880 -2670 41400 4950 Dec-31 Rent Expense a/c Dr. To Prepaid Rent (Rent expired) 5400 x 11/12 4950 22000 Cashflow from Investing Activity Land Sold Land Purchased Cash used for Investing Activity -31000 4400 -9000 Dec-31 Unearned Revenue To Service Revenue (Services earned) 4400 -1800 Cashflow from Financing Activity Common stock issued 52000 Cash Dividends paid Cash generated from Financing Activity Increase in Cash Beginning Cash Balance Ending Cash Balance 0 50200 82600 50000 132600