Question

Waddell Company had the following balances in its accounting records as of December 31, Year 1: Liabilities and Equity 2 Assets 45,e00 Accounts Payable 43,80 Common Stock 31,000 Retained Earnings Accounts Receivable $119,80 Total $119,00e The following accounting events apply to Waddell Company's Year 2 fiscal year: Jan. 1 Acquired $40,000 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 $1,900 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 $19,000 July Received $7,280 cash in advance as a retainer for services to be performed monthly over the coming year Sept 1 Sold land for $20,000 cash that had originally cost $20,000 Oct. 1 Purchased $1,880 of supplies on account Dec. 31 Earned $57,0 of service revenue on account during the year 31 Received cash collections from accounts receivable amounting to $64,000 31 Incurred other operating expenses on account during the year that amounted to $13,000 31 Recognized accrued salaries expense of $5,3ea 31 Had $150 of supplies on hand at the end of the period 31 The land purchased on April 1 had a market value of $44,000 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? I. What amount of retained earnings would be reported on the balance sheet?

Answer 1

a. Amount to be reported for land = $ 31,000 + $ 31,000 - $ 20,000 = $ 42,000.

b. Cash flows from operating activities = $ 46,800.

c. Rent expense to be reported on the income statement = $ 4,950

d. Total liabilities to be reported on the balance sheet = $ 23,980.

e. Amount of supplies expense to be reported on the income statement = $ 1,080 - $ 150 = $ 930.

f. Unearned revenue to be reported on the balance sheet = $ 7,200 - $ 3,600 = $ 3,600.

g. Net cash flows from Investing Activities = $ ( 11,000).

h. Total expenses to be reported on the income statement = $ 24,180

i. Service revenue to be reported on the income statement = $ 60,600.

j. Cash flows from financing activities = $ 38,100.

k. Net income to be reported on the income statement = $ 60,600 - $ 24,180 = $ 36,420

l. Retained earnings to be reported on the balance sheet = $ 50,520

Workings:

Waddell Company
Accounting Equation
Year 2
	Assets					Liabilities			Stockholders Equity		Revenues	Expenses
	Cash	Accounts Receivable	Supplies	Prepaid Rent	Land	Accounts Payable	Unearned Revenue	Salaries Payable	Common Stock	Retained Earnings
Bginning balances	45,000	43,000	0	0	31,000	20,000	0	0	83,000	16,000
Jan 1	40,000								40,000
Feb 1	(5,400)			5,400
Mar 1	(1,900)									(1,900)
Apr. 1	(31,000)				31,000
May 1	(19,000)					(19,000)
July 1	7,200						7,200
Sep 1	20,000				(20,000)
Oct 1			1,080			1,080
Dec 31		57,000									57,000
Dec 31	64,000	(64,000)
Dec 31						13,000						13,000
Dec 31								5,300				5,300
Dec 31			(930)									930
Dec 31				(4,950)								4,950
Dec 31							(3,600)				3,600
Dec 31											60,600	24,180
Dec 31										36,420	0	0
Ending balances	118,900	36,000	150	450	42,000	15,080	3,600	5,300	123,000	50,520