Question

1. To complete Requirement b, use formulas where normal arithmetic calculations are made within the financial statements (in particular the statement of changes in stockholders’ equity).

The following accounts and balances were drawn from the records of Shearer Company at December 31, Year 2:

Cash	$22,100	Accounts receivable	$21,000
Land	43,000	Cash flow from operating act.	8,600
Insurance expense	2,500	Beginning retained earnings	47,200
Dividends	5,000	Beginning common stock	5,500
Prepaid insurance	3,500	Service revenue	86,000
Accounts payable	15,000	Cash flow from financing act.	9,000
Supplies	2,100	Ending common stock	14,500
Supplies expense	1,000	Cash flow from investing act.	(6,000)
Rent expense	3,500	Other operating expenses	59,000

B.) It is interesting to speculate about what would happen if certain operating results change for better or worse. After completing Requirement a, change certain account balances for each of the following independent operating adjustments. After each adjustment, notice how the financial statements would differ if the change in operations were to occur. After noting the effect of each adjustment, return the data to the original amounts in Problem 2-41A and then go to the next operating adjustment. At the end, return all numbers to the original balances noted above.

Input the following table into the bottom of your excel worksheet, calculate the new amounts on the financial statements for the various operating changes listed:

Original	1	2	3	4	5
Net income
Total assets
Total liabilities
Total stockholders’ equity
Total liabilities & stockholders’ equity

Independent Operating Adjustments

1. Revenue and the related Accounts Receivable increased $10,000.
2. Revenue and the related Accounts Receivable decreased $10,000.
3. Operating Expenses and the related Accounts Payable decreased $400.
4. Operating Expenses and the related Accounts Payable increased $400.
5. Dividends paid decreased $500 and cash changed accordingly.

Answer 1

Amount $ 86,000.00 Income statement Paticulars Amount Service revenue $ 86,000.00 Total revenue Less: Operating expense Rent expense $ 3,500.00 Insurance expense $ 2,500.00 Supplies expense $ 1,000.00 Other operating expense $ 59,000.00 Total operating expense Net income $ 66,000.00 $ 20,000.00 Statement of changes in Stockholder's equity Particulars Amount Amount Starting common stock $ 5,500.00 Add: additional capital $ 9,000.00 Ending common stock $14,500.00 Beginning retained earnings $ 47,200.00 Add: Net income $ 20,000.00 Less: Dividend $ 5,000.00 Ending retained earnings $62,200.00 Total stockholder's equity $ 76,700.00 Balance sheet Assets Current assets Cash Accounts receivable Prepaid insurance Supplies Total current assets Non current assets Land Total Non current assets Total Assets $ 22,100.00 $ 21,000.00 $ 3,500.00 $ 2,100.00 $48,700.00 $43,000.00 $ 43,000.00 $91,700.00 $ 15,000.00 $ 15,000.00 Liabilities Current liabilities Accounts payable Total current liabilities Stockholder's equity Ending common stock Ending retained earnings Total stockholder's equity Total liabilities and stockholder's equity $ 14,500.00 $62,200.00 $ 76,700.00 $91,700.00 Statement of cash flow Particulars Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net change in cash Amount $ 8,600.00 $ -6,000.00 $ 9,000.00 $ 11,600.00