Question

In Year 1, Lee Inc. billed its customers $62,000 for services performed. The company collected $51,000 of the amount billed. Lee incurred $39,000 of other operating expenses on account. Lee paid $31,000 of the accounts payable. Lee acquired $40,000 cash from the issue of common stock. The company invested $21,000 cash in the purchase of land.
Required:
a. What amount of revenue will Lee report on the Year 1 income statement?
b. What amount of cash flow from revenue will be reported on the statement of cash flows?
c. What is the net income for the period?
d. What is the net cash flow from operating activities for the period?
e. What is the amount of net cash flow from investing activities?
f. What is the amount of net cash flow from financing activities?
g. What amounts of total assets, liabilities, and equity will be reported on the year-end balance sheet?

Answer 1

Answer:

Lee Inc.

a. Amount of revenue Lee will report on the Year 1 income statement:

= $62,000

b. Amount of cash flow from revenue to report on the statement of cash flows:

= $51,000

c. The net income for the period:

= $23,000

d. The net cash flow from operating activities for the period:

= $20,000

e. The amount of net cash flow from investing activities:

= ($21,000)

f. The amount of net cash flow from financing activities:

= $40,000

f. Amounts of total assets, liabilities, and equity on the year-end balance sheet:

Total assets = $71,000

Total liabilities = $8,000

Total Equity = $63,000

Explanation:

a) Data and Calculations:

Service Revenue = $62,000

Cash collection from customers $51,000

Outstanding (Accounts Receivable) $11,000 ($62,000 - 51,000)

Operating expense on account = $39,000

Cash paid on account  31,000

Outstanding (Accounts Payable) $8,000

Common Stock $40,000

Land $21,000

b) Cash Account:

Cash collection from customers $51,000

Cash paid on account                   (31,000)

Common Stock                              40,000

Land                                              (21,000)

Cash balance                              $39,000

c) Income Statement:

Service Revenue   $62,000

Expenses                (39,000)

Net Income           $23,000

d) Assets:

Cash                         $39,000

Accounts Receivable   11,000

Land                            21,000

Total                          $71,000

e) Liabilities:

Accounts Payable      $8,000

Common Stock          40,000

Net Income                23,000

Total                          $71,000

f) Statement of Cash Flows:

Operating activities:

Cash collection from customers     $51,000

Cash paid to suppliers                      (31,000)

Net cash from operating activities $20,000

Investing activities:

Land                                                ($21,000)

Financing activities:

Common Stock                               $40,000