At the beginning of the current fiscal year, the balance sheet for Davis Co. showed liabilities...

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At the beginning of the current fiscal year, the balance sheet for Davis Co. showed liabilities of $160,000. During the year,

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Answer 1

Answer #1

We know that as per accounting equation total assets = total liabilities + stockholder's equity

Value of assets at end of year = Total liabilities + Stockholder's equity
Value of assets at end of year	(160000-9000)+214500
Value of assets at end of year	$365,500

Calculation of beginning value of assets
Value of assets at start of year	365500-32500
Value of assets at start of year	$333,000

Calculation of stockholder's equity at beginning of year
Stockholder's equity	Total assets at beginning - Total liabilities at beginning
Stockholder's equity	333000-160000
Stockholder's equity	$173,000

Calculation of ending and beginning retained earnings balance
	Beginning	Ending
Stockholder's equity	$173,000	$214,500
Less: Paid in capital	$15,000	$96,000
Retained earnings balance	$158,000	$118,500

Calculation of net income for year
Retained earnings (ending)	Beginnig retained earnings+Net income-Dividend
$118,500	158000+Net income - 12500
Net loss	158000-12500-118500
Net loss	$27,000
Thus, net loss for year is $27,000

The financial statement effect is shown below
					Stockholder's equity
	Assets	=	Liabilities	+	PIC	+	RE
Beginning	$333,000		$160,000		$15,000		$158,000
Changes	$32,500		-$9,000		$81,000		-$39,500

Ending	$365,500		$151,000		$96,000		$118,500

Statement of stockholder's equity
Retained earnings, beginning	$158,000
Less: Net loss	-$27,000
Less: Dividends	-$12,500
Retained earnings, ending	$118,500

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Answer 2

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