Answer:
Due to space limitations, I used an excel spreadsheet to answer questions a, b, c and d.
d1)
Ortho Company
Income Statements
For years 1 and 2
Year 1 Year 2
Service revenue $59,000 $85,000
Expenses <u>($43,000)</u> <u>($62,000)</u>
Net income $16,000 $23,000
d2)
Ortho Company
Statement of Stockholders' Equity
For years 1 and 2
Year 1 Year 2
Beginning balance $0 $77,000
Common stocks issued $68,000 $50,000
<u>Net income $16,000 $23,000</u>
Subtotal $84,000 $150,000
<u>Dividends paid ($7,000) ($2,000)</u>
Ending balance Dec. 31, year 1 $77,000 $148,000
d3)
Ortho Company
Balance Sheet
For years 1 and 2
Year 1 Year 2
Assets:
Cash $76,000 $142,000
Land $37,000 $62,000
Total assets $113,000 $204,000
Liabilities:
Notes payables $36,000 $56,000
Stockholders' Equity:
Common stock $68,000 $118,000
Retained earnings $9,000 $30,000
Total liabilities + equity $113,000 $204,000
d4)
Ortho Company
Statement of cash flows
For years 1 and 2
Year 1 Year 2
Cash flows from operating act.
Net income $16,000 $23,000
No adjustments required $0 $0
Net cash provided by OA $16,000 $23,000
Cash flows from investing act.
Purchase of land ($37,000) ($20,000)
Net cash provided by IA ($37,000) ($20,000)
Cash flows from financing act.
Issuance of common stocks $68,000 $50,000
Dividends paid ($7,000) ($2,000)
Issuance of long term debt $36,000 $20,000
Net cash provided by FA $97,000 $68,000
Net increase in cash $76,000 $66,000
Initial cash balance $0 $76,000
Ending cash balance $76,000 $142,000
