page 66

E 2-5 DONOVAN COMPANY

Balance Sheet
As on December 31, 2014
Assets
Current assets
Cash 11840
Accounts receivable 12,600
Prepaid insurance 3,200
Total current assets 27640
Property, plant, and equipment
Land 61,200
Buildings 105800
Less: Accumulated depreciation
buildings 45,600 60,200
Equipment 82400
Less: Accumulated depreciation
equipment 18,720 63,680 185,080
Total assets 212,720
Liabilities and Stockholders Equity
Current liabilities
Accounts payable 9500
Current maturity of note payable 13,600
Interest payable 3,600
Total current liabilities 26700
Long-term liabilities
Note payable ($93,600 $13,600) 80,000
Total liabilities 106,700
Stockholders equity
Common stock 60000
Retained earnings
($40,000 + $6,020**) 46,020
Total stockholders equity 106,020
Total liabilities and stockholders equity 212,720
 Net Income **
Service Revenue 14700
Less: Insurance Expense 780
Depreciation Expense 5300
Interest Expense 2600
Net Income 6020
page 66
EXERCISE 2-8
(a) BARFIELD CORPORATION
Income Statement
For the Year Ended July 31, 2014
Revenues
Service revenue 66100
Rent revenue 8,500
Total revenues 74600
Expenses
Salaries and wages expense 57,500
Supplies expense 15,600
Depreciation expense 4,000
Total expenses 77,100
Net loss -2,500

(b) BARFIELD CORPORATION

Balance Sheet
31-Jul-14
Assets
Current assets
Cash 29200
Accounts receivable 9,780
Total current assets 38980
Property, plant, and equipment
Equipment 18,500
Less: Accumulated depreciation
equipment 6,000 12,500
Total assets 51,480

Liabilities and Stockholders Equity

Current liabilities
Accounts payable 4100
Salaries and wages payable 2080
Total current liabilities 6180
Long-term liabilities
Notes payable 1800
Total liabilities 7980
Stockholders equity
Common stock 16,000
Retained earnings 27,500
Total stockholders equity 43,500
Total liabilities and stockholders Equity 51480
BARFIELD CORPORATION
Retained Earnings Statement
For the Year Ended July 31, 2014
Retained earnings, August 1, 2011 34000
Less: Net loss 2500
Dividends 4000
Retained earnings, July 31, 2012 27500
Page 70
P 2-3A
(a) RAMIREZ ENTERPRISES
Income Statement
For the Year Ended April 30, 2014
Sales revenue $5,100
Expenses
Cost of goods sold $1,060
Salaries and wages expense 700
Interest expense 400
Depreciation expense 335
Insurance expense 210
Income tax expense 165
Total expenses 2,870
Net income $2,230

RAMIREZ ENTERPRISES
Retained Earnings Statement
For the Year Ended April 30, 2014
Retained earnings, May 1, 2011 $1,600
Add: Net income 2,230 3,830
Less: Dividends 325
Retained earnings, April 30, 2012 $3,505

PROBLEM 2-2A (Continued)

(b) RAMIREZ ENTERPRISES

Balance Sheet
30-Apr-14
Assets
Current assets
Cash $1,270
Short-term investments 1,200
Accounts receivable 810
Inventory 967
Prepaid insurance 60
Total current assets $4,307
Property, plant, and equipment
Land. 3,100
Equipment $2,420
Less: accumulated
depreciationequipment 670 1,750
Total property, plant, and equipment 4,850
Total assets $9,157
Liabilities and Stockholders Equity

Current liabilities
Notes payable $ 61
 Accounts payable 834
Salaries and wages payable 222
Income taxes payable 135
Total current liabilities $1,252
Mortgage payable 3,500
Total liabilities 4,752
Stockholders equity
Common stock 900
Retained earnings 3,505 4,405
Total stockholders equity
Total liabilities and stockholders equity $9,157
P3-3A, Analyze transactions and prepare an income statement, retained earnings statement, and balance sheet.

Cindy Braun created a corporation providing legal services, Cindy Braun Inc., on July 1, 2014. On July 31 the balance sheet showed:
Cash $4,000 Accounts Payable $4,200
Accounts Receivable $2,500 Common Stock $6,200
Supplies $500 Retained Earnings $1,600
Equipment $5,000

During August the following transactions occurred.

Aug. 1, Collected $1,100 of accounts receivable due from customers.

Aug. 4, Paid $2,700 cash for accounts payable due.

Aug. 9, Earned revenue of $5,400 , of which $3,600 is collected in cash and the balance is due in September.

Aug. 15, Purchased additional office equipment for $4,000 , paying $700 in cash and the balance on
account.

Aug. 19, Paid salaries $1,400 , rent for August $700 and advertising expenses $350

Aug. 23, Paid a cash dividend of $700

Aug. 26, Borrowed $5,000 from Standard Federal Bank; the money was borrowed on a 4-month note payable.

Aug. 31, Incurred utility expenses for the month on account $380

Instructions:
(a) Utilizing the table to the right of the data, prepare a tabular analysis of the August transactions beginning with July 31 balances. The
column heading should be: Cash + Accounts Receivable + Supplies + Equipment = Notes Payable + Accounts Payable + Common Stock +
Retained Earnings + Revenues - Expenses - Dividends. Include margin explanations for any changes in Retained Earnings.

Assets Liabilities
Notes Accounts
+ + + = + +
Cash Accts Rec Supplies Equip Payable Payable
July 31 balances: 4,000 + 2,500 + 500 + 5,000 = + 4,200 +

Aug 01 1,100 + (1,100) + + = + +

Aug 04 (2,700) + + + = + (2,700) +

Aug 09 3,600 + 1,800 + + = + +

Aug 16 (700) + + + 4,000 = + 3,300 +

Aug 19 (2,450) + + + = + +

+ + + = + +
Aug 23 (700) + + + = + +

Aug 26 5,000 + + + = 5,000 + +

Aug 31 380
$7,150 + $3,200 + $500 + $9,000 = $5,000 + $5,180 +

$19,850 =
t.

lance sheet showed:

(b) Prepare an income statement for August, a retained earnings statement for August, and a classified balance sheet a

CINDY BRAUN INC. CINDY BRAUN

Income Statement Retained Earnings St
For the Month Ended August 31, 2014 For the Month Ended Aug
Revenues Retained earnings, August 1
Service revenue $5,400 Add: Net income
Expenses
due in September. Salaries and wages expense $1,400 Less: Dividends
Rent expense 700 Retained earnings, August 31
nd the balance on Utilities expense 380
Advertising expense 350
Total expenses 2,830
Net income $2,570

CINDY BRAUN INC.

Balance Sheet
e payable. August 31, 2014
Assets Liabilities and Stockholders Eq
Current assets Current liabilities
Cash $7,150 Notes payable
Accounts receivable 3,200 Accounts payable
July 31 balances. The Supplies 500 Total current liabilities
yable + Common Stock + Total current assets $10,850 Stockholders equity
tained Earnings. Equipment 9,000 Common stock
Total assets $19,850 Retained earnings
Total liabilities and stockholders equity

Stockholders Equity
Common Retained
+ + - -
Stock Earnings Revenues Expenses Div Explanations
6,200 + 1,600 + - -

+ + - -

+ + - -

+ + 5,400 - - Service Revenue

+ + - -

+ + - (1,400) - Sal and Wages Exp

(700) Rent Expense
+ + - (350) - Advertising Expense
 + + - - (700) Dividends

+ + - -

(380) Utilities Expense

$6,200 + $1,600 + $5,400 - $2,830 - $700

$19,850
d a classified balance sheet at August 31.

CINDY BRAUN INC.

Retained Earnings Statement
For the Month Ended August 31, 2014
ained earnings, August 1 $1,600
d: Net income 2,570
4,170
s: Dividends 700
ained earnings, August 31 $3,470

bilities and Stockholders Equity

$5,000
5,180
t liabilities $10,180
uity
6,200
3,470 9,670
ies and stockholders equity $19,850