Financial Accounting 12th Edition SOLUTION MANUAL by Jerry J. Weygandt, Paul D. Kimmel, Jill E. Mitchell

Financial Accounting 12th Edition SOLUTION MANUAL by Jerry J. Weygandt, Paul D. Kimmel, Jill E. Mitchell

CT 1.4 (Continued) (c) Actual net income for March can be determined by adding dividends to the change in stockholders’ equity during the month as shown below: Stockholders’ equity, March 31, per balance sheet ............. $27,450 Less: Stockholders’ investment, March 1 ............................. 25,000 Increase in stockholders’ equity ........................................... 2,450 Add: Dividends ..................................................................... 1,000 Net income .............................................................................. $ 3,450 Alternatively, net income can be found by first determining the revenues earned [described in (d) below] and then subtracting expenses. (End. stk. equity – Beg, stk. equity + Div.) (d) Revenues earned can be determined by adding expenses incurred during the month to net income. March expenses were Rent, $1,000; Wages, $400; Advertising, $750; and Utilities, $100 for a total of $2,250. Revenues earned, therefore, were $5,700 ($2,250 + $3,450). Alternatively, since all revenues are received in cash, revenues earned can be computed from an analysis of the changes in cash as follows: Beginning cash balance ........................................ $25,000 Less: Cash payments Caddy shack ......................................... $8,000 Golf balls and clubs ............................. 800 Rent ....................................................... 1,000 Advertising............................................ 600 Wages .................................................... 400 Dividends .............................................. 1,000 11,800 Cash balance before revenues ............................. 13,200 Cash balance, March 31 ........................................ 18,900 Revenues ............................................................... $ 5,700 (End. cash bal. + Tot. cash pmts. – Beg. cash bal.) LO 5, BT: E, Difficulty: Moderate, TOT: 20 min., AACSB: Analytic, AICPA FC: Reporting, IMA: Reporting I have received the balance sheet of New York Company as of December 31, 2022. A number of items on this balance sheet are not properly reported; corrected balance sheet is attached. Listed below is a summary of the corrections. 1. The balance sheet should be dated as of a specific date, not for a period of time. Therefore, it should be dated “December 31, 2022.” 2. Equipment should be shown as an asset and reported below Supplies on the balance sheet. 3. Accounts receivable should be shown as an asset, not a liability, and reported between Cash and Supplies on the balance sheet. 4. Accounts payable should be shown as a liability, not an asset. The note payable is also a liability and should be reported in the liability section. 5. Liabilities and stockholders’ equity should be reported separately on the balance sheet. Common stock is not a liability. 6. Common stock and retained earnings are part of stockholders’ equity.