Question

Owners' Equity Homework The following balances are from the Cheyenne's Accounting Company 2018 20,000 50,000 3,000 190,000 60,000 70,000 5,000 2017 10,000 42,000 4,000 180,000 50,000 40,000 10,000 Cash Accounts Receivable Prepaid Rent Equipment Accumulated Depreciation Accounts Payable Salaries Payable Taxes Payable Note Payable Common Stock ($1 Par) Paid In Capital Retained Earnings Accounting Fees Salary Expense Rent Expense Interest Expense Depreciation Expense 100,000 500 4,500 31,000 70,000 2,000 18,000 35,000 100,000 40,000 24,000 6,000 10,000 The common stock outstanding was 500 shares on January 1 and then 1,500 shares were sold on June 30. During 2018, the company paid a dividend of No equipment was sold during the year. The tax rate is 30% and 1/2 of 2018 were paid in 2018 and the rest will be paid in 2019. The Note Payable requires an annual payment of $30,000 principal plus interest at 6% on December 31 of each year. (Note- this is a service company- no COGS!) For the year ended 2018 prepare a Balance Sheet, Income Statement, Statement of Owners' Equity and Statement of Cash Flows.

Answer 1

The company has paid dividend of Rs 10,000 which is calculated as follows:-

Retained earnings a/c
To, dividend paid (balancing figure)	10,000	By, balance b/d	31,000
		By, P & L	14,000
By, balance c/f	35,000

Income Statement for the year 2018
Revenue
Accounting Fees	100,000 $
Total (A)	100,000 $
Expenses
Salary Expenses	40,000 $
Rent Expenses	24,000 $
Interest expenses	6,000 $
Depreciation expenses	10,000 $
Total (B)	80,000 $
Net Income before tax	20,000 $
Less:- Taxes payable	(6,000) $
Net income after taxes	14,000 $

Balance Sheet for the year ended 2018
Assets
Non Current Asset
Equipment(net of depreciation)	130,000 $
Current Asset
Accounts receivable	50,000
Prepaid Rent	3,000
Cash	20,000
Total	203,000 $
Equity & Liabilities
Equity
Common Stock	2,000
Other paid in capital``	18,000
Retained Earnings	35,000
Non Current liabilities
Notes Payable	70,000
Current liabilities
Accounts payable	70,000
Salaries payable	5,000
Taxes payable	3,000
Total	203,000 $

Cash Flow Statement for year ended 2019
Particulars	Amount
CASH FLOW FROM OPERATING ACTIVITIES
Net profit after taxes	14,000
(+) Taxation	6,000
(+) Depreciation	10,000
(+) interest paid	6,000
Operating profit before working capital changes	36,000
(-) Increase in Accounts receivable	(8,000)
(+) Decrease in prepaid rent	1,000
(+) Increase in Accounts payable	30,000
(-) decrease in salaries payable	(5,000)
Operating profit before tax	54,000
(-) Taxes paid	(3,000)
Cash Flow from Operating Activities (A)	51,000
CASH FLOW FROM INVESTING ACTIVITIES
Equipment purchased	(10,000)
Cash Flow from Investing Activities (B)	(10,000)
CASH FLOW FROM FINANCING ACTIVITIES
Interest paid	(6,000)
Dividend paid	(10,000)
Proceed from common stock	1,500
Proceed from other paid in capital	13,500
Notes repaid	(30,000)
Cash Flow From Financing Activities (C)	(31,000)
Net cash flow from Operations (A+B+C)	(10,000) $
Opening balance of Cash	10,000 $
Closing Cash Balance	20,000 $