Answer:
Majka Company
a) Accounting equation to record effects of each event:
1. Assets (Cash) increased $29,500 = Liabilities + Equity (Retained Earnings) increased $29,500.
2. Assets (Cash) decreased $13,500 = Liabilities + Equity (Retained Earnings) decreased $13,500.
3. Assets (Cash) decreased $1,800 = Liabilities + Equity (Retained Earnings) decreased $1,800.
b) Income Statement, Statement of Changes in Stockholders' Equity, and a Balance Sheet dated December 31, 2016:
1) Income Statement for the year ended December 31, 2016:
Sales $29,500
Expenses ($13,500)
Net Income $16,000
Dividend ($1,800)
Retained Earnings $14,200
2) Statement of Changes in Stockholders' Equity:
Retained Earnings b/f $0
Net Income $16,000
Dividend ($1,800)
Retained Earnings $14,200
3. Balance Sheet as at December 31, 2016:
Assets:
Cash ($29,500 - 13,500 - 1,800) $14,200
Liabilities + Equity:
Equity: Retained Earnings $14,200
c) Reason for different terminology to date income statement and balance sheet:
Income statement is prepared for an accounting period. It covers a specified period, while a balance sheet is prepared as at an accounting date. This means that one can prepare a balance sheet daily, or even after each transaction. But, an income statement covers a period of time, say a month, a quarter, or six months, or a year, as the case may be.
Explanation:
Income Statement, Changes in Equity, and the Balance Sheet are important financial statements, which a business prepares to report its financial performance (results), the changes that occur in owners' equity, and the financial position respectively.
