E 1-2B (similar to E1-6) [LO 1] Analyzing Revenues and Expenses and Preparing an Income
Statement
Assume that you are the owner of University Market, which specializes in items that interest
students.
At the end of March 2011, you find (for March only) this information:
a. Sales, per the cash register tapes, of $150,000, plus one sale on credit (a special situation)
of $5,000.
b. With the help of a friend (who majored in accounting), you determine that all of the
goods sold during March cost $60,000 to purchase.
c. During the month, according to the checkbook, you paid $32,000 for salaries, rent,
supplies, advertising, and other expenses; however, you have not yet paid the $1,100
monthly utilities for March on the store and fixtures.
Required:
On the basis of the data given (disregard income taxes), what was the amount of net income for
March? Show computations. ( Hint: A convenient form to use has the following major side
captions: Revenue from Sales, Expenses, and the difference—Net Income.)
ANSWER:
Income Statement
for the period ended 31/03/2011
Revenues:
Cash Sales $ 150,000
Credit Sales $ 5,000
Total Revenues $ 155,000
Expenses:
COGS $ 60,000
Other Expenses $ 32,000
Utilities $ 1,100
Total Expenses $ 93,100
NET INCOME $ 61,900
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E1-6B (similar to E1-12) [LO 1] Preparing a Statement of Retained Earnings Barbara’s Design
Corporation was organized on January 1, 2011. For its first two years of operations, it reported the
following:
Net income for 2011 $ 39,000
Net income for 2012 40,000
Dividends for 2011 15,200
Dividends for 2012 19,700
Total assets at the end of 2011 150,000
Total assets at the end of 2012 320,000
Required:
On the basis of the data given, prepare a statement of retained earnings for 2012. Show computations.
ANSWER:
Barbara’s Design Corporation
Statement of Retained Earning
From the period ended 31/12/2011
Net Income 2011 $ 39,000
Dividends for 2011 $ (15,200)
Retained Earnings, 31/12/2011 $ 23,800
Barbara’s Design Corporation
Statement of Retained Earning
from the period ended 31/12/2012
Retained Earnings, 31/12/2011 $ 23,800
Net Income 2012 $ 40,000
Dividends for 2012 $ (19,700)
Retained Earnings, 31/12/2012 $ 44,100
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E 1-7B (similar to E1-6) [LO 1] Analyzing Revenues and Expenses and Preparing an Income
Statement
Assume that you are the owner of Fabulous Styles, which specializes in clothing for teens.
At the end of March 2011, you find (for March only) this information:
a. Sales, per the cash register tapes, of $180,000, plus one sale on credit (a special situation)
of $4,000.
b. With the help of a friend (who majored in accounting), you determine that all of the
goods sold during March cost $90,000 to purchase.
c. During the month, according to the checkbook, you paid $22,000 for salaries, rent,
supplies, advertising, and other expenses; however, you have not yet paid the $1,000
monthly utilities for March on the store and fixtures.
Required:
On the basis of the data given (disregard income taxes), what was the amount of net income for
March? Show computations. (Hint: A convenient form to use has the following major side captions:
Revenue from Sales, Expenses, and the difference—Net Income.)
ANSWER:
Income Statement
for the period ended 31/03/2011
Revenues:
Cash Sales $ 180,000
Credit Sales $ 4,000
Total Revenues $ 184,000
Expenses:
COGS $ 90,000
Other Expenses $ 22,000
Utilities $ 1,000
Total Expenses $ 113,000
NET INCOME $ 71,000
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E1-9B (similar to E1-10) [LO1] Inferring Values Using the Income Statement and Balance Sheet
Equations Review the chapter explanations of the income statement and the balance sheet
equations. Apply these equations in each independent case to compute the two missing amounts for
each case. Assume that it is the end of 2012, the first full year of operations for the company. (Hint:
Organize the listed items as they are presented in the balance sheet and income statement equations
and then compute the missing amounts.)
Independen Total Total Net Income Total Total Stockholders’
t Revenues Expenses (Loss) Assets Liabilities Equity
Cases
A $240,820 $176,700 $ $295,000 $95,000 $
B 165,700 32,020 585,000 365,400
C 67,990 89,890 288,200 195,760
D 43,590 15,840 218,675 99,525
E 225,130 210,600 195,800 316,200
ANSWER:
Independent Case (A)
Income Statement
For the period ended 31/03/2012
Total Revenues $ 240,820
Total Expenses $ 176,700
NET INCOME $ 64,120
Balance Sheet
at 31/12/2012
Total Assets $295,000
Total Liabilities’ $95,000
Stockholder Equity $200,000
Total liabilities and stockholders' equity $295,000
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Independent Case (B)
Income Statement
For the period ended 31/03/2012
Total Revenues $ 197,720
Total Expenses $ 165,700
NET INCOME $ 32,020
Balance Sheet
at 31/12/2012
Total Assets $585,000
Total Liabilities’ $219,600
Stockholder Equity $365,400
Total liabilities and stockholders' equity $585,000
Independent Case (C)
Income Statement
For the period ended 31/03/2012
Total Revenues $ 67,990
Total Expenses $ 89,890
NET INCOME $ (21,900)
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Balance Sheet
at 31/12/2012
Total Assets $288,200
Total Liabilities’ $195,760
Stockholder Equity $92,440
Total liabilities and stockholders' equity $288,200
Independent Case (D)
Income Statement
For the period ended 31/03/2012
Total Revenues $ 43,590
Total Expenses $ 27,750
NET INCOME $ 15,840
Balance Sheet
at 31/12/2012
Total Assets $318,200
Total Liabilities’ $218,675
Stockholder Equity $99,525
Total liabilities and stockholders' equity $318,200
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Independent Case (E)
Income Statement
For the period ended 31/03/2012
Total Revenues $ 225,130
Total Expenses $ 210,600
NET INCOME $ 14,530
Balance Sheet
at 31/12/2012
Total Assets $512,000
Total Liabilities’ $195,800
Stockholder Equity $316,200
Total liabilities and stockholders' equity $512,000
Thank you!
Magdy Saber Elsayed Ibrahim
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