Question

Prat Corp. started the Year 2 accounting period with $33,000 of assets (all cash), $13,500 of liabilities, and $8,000 of common stock. During the year, the Retained Earnings account increased by $10,550. The bookkeeper reported that Prat paid cash expenses of $27,500 and paid a $2,300 cash dividend to the stockholders, but she could not find a record of the amount of cash that Prat received for performing services. Prat also paid $6,000 cash to reduce the liability owed to the bank, and the business acquired $7,400 of additional cash from the issue of common stock.
a-1. Prepare an income statement for the 2018 accounting period.
a-2. Prepare a statement of changes in stockholders’ equity for the 2018 accounting period.
a-3. Prepare a period-end balance sheet for the 2018 accounting period.
a-4. Prepare a statement of cash flows for the 2018 accounting period.
b) Determine the percentage of total assets that were provided by creditors, investors, and earnings.

Answer 1

Answer:

1.Net Profit $12,850

Profit transfered to retained earnings $10,550

2. $37,450

3.$44,950

4a.$44,950

4b.CREDITORS=16.69%

INVESTORS=34.26%

EARNINGS=49.05%

Explanation:

1. Preparation of Income statement

Prat Corp. Income Statement

For the year ending 2018

Sales Revenue (Balancing figure) 40,350

(27,500+10,550+2,300)

Less: Expenses (27,500)

Net Profit 12,850

Less: Dividend (2,300)

Profit transfered to retained earnings $10,550

2. Preparation for Statement of changes in stakeholder's equity.

Common stock($) Retained Earnings($) Total($)

Opening Balance 8,000 11,500 19,500

(33,000-13,500-8,000)

Issue of common stock 7,400 - 7,400

Profit during the year - 12,850 12,850

(40,350-27,500)

Dividend paid - (2,300) (2,300)

Closing Balance $15,400 $22,050 $37,450

3. Preparation of Balance sheet

Prat Corp. Balance Sheet

As of December 31, 2018

ASSETS

Current Assets

Cash CFS 44,950

Total Assets 44,950

EQUITY AND LIABILITIES

Stockholder's Equity

Common Stock 15,400

Retained Earnings 22,050

Total Stockholder's Equity 37,450

Liabilities (13,500-6000) 7,500

Total Liability and stockholder's equity $44,950

(37,450+7,500)

4a. Preparation for Statement of Cash flows

Prat Corp. Cash Flow Statement

For the year ended 2018

Cash Flow from operating activites

Increase in Retained earnings 10,550

Net cash provided by operating activity 10,550

Cash flow from financing activity

Increase in common stock 7,400

Reduction in debt 6,000

Net cash provided by financing activity 1,400

(7,400-6,000)

Increase in cash 11,950

(10,550+7,400-6,000)

Cash at beginning of the year 33,000

Cash at end of the year 44,950

(33,000+11,950)

4b) Calculation to Determine the percentage of total assets that were provided by creditors, investors, and earnings.

CREDITORS=7,500/44,950

CREDITORS=0.1669*100

CREDITORS=16.69%

INVESTORS=15,400/44,950

INVESTORS=0.3426*100

INVESTORS=34.26%

EARNINGS =22,050/44,950

EARNINGS=0.4905*100

EARNINGS=49.05%