Accounting Basics Worksheet Part 1. Accounting in Business Discuss the role of accounting in business by listing 5 different uses for accounting in the space below. Use this weeks content, readings, and your LIRN resources or the Internet, as needed, to support your answer. Part 2. Financial Statements Listed below are questions posed by various users of a companys financial statements. Fill in the blank with the financial statement(s) the user would most likely use to find this information. Your choices are the income statement, balance sheet, statement of retained earnings, and/or the statement of cash flows. Enter your answer into the shaded boxes in the table below (6 answers). User Question Financial Statement(s) Stockholder How did this years sales figures compare with last years sales figures? Banker How much in borrowings does the company currently owe? Supplier How much does the company owe its suppliers in total? Stockholder Did the company have any dividends in the prior year? Advertising agent How much advertising did the company incur in order to generate sales? Banker What was the companys total interest cost last year? Part 3. Net Income and Retained Earnings Nova Corporation reports the following as of December 31: Revenues $ 10,000 Beginning retained earnings 20,000 Expenses 8,000 Dividends 1,000 Calculate net income and ending retained earnings for the year ending December 31. Refer to your text and lesson for the calculations. Enter your answers in the shaded boxes below (2 answers). Net Income Ending Retained Earnings Part 4. Links Between Financial Statements The following are incomplete financial statements for Sterling Inc. Calculate the missing amounts and enter your answers into the shaded boxes for each statement (5 answers). TIP: Work this problem in reverse, starting with the Statement of Retained Earnings. Using your knowledge of the accounting equation and the interrelationship among the financial statements, you can solve for the missing amounts by making it a simple math problem. Balance Sheet Assets Cash $ 8,000 Inventory 22,000 Building 40,000 Total Assets $ 70,000 Liabilities Accounts payable $ 7,000 Equity Contributed capital Retained earnings Total liabilities & equity $ 70,000 Income Statement Service revenue $ 90,000 Salaries expense Utilities expense 20,000 Net income Statement of Retained Earnings Retained earnings, beginning balance $ 20,000 Net income Dividends 10,000 Retained earnings, ending balance $ 60,000 Part 5. Prepare Financial Statements The following items are available from the records of Honky Tonk Records Inc. at the end of the year: Accounts payable $ 27,000 Accounts receivable 21,000 Advertising expense 6,000 Buildings 76,000 Contributed capital 30,000 Cash 6,320 Notes payable 70,000 Salaries expense 9,500 Service revenue 16,820 Equipment 25,000 Prepare Honky Tonks income statement and statement of retained earnings for the year and its balance sheet at the end of the year. Enter your information into the shaded boxes of the statements below. TIP: Net income is the difference between revenue and expenses. The ending balance of retained earnings is not provided. You can solve for it by using the accounting equation or using the BIDE formula (Beginning retained earnings plus net Income (or less net loss), less Dividends equals Ending retained earnings). Remember that the beginning balance of retained earnings is $0 and no dividends were paid. a. Income Statement (7 answers) Honky Tonk Records Inc. Income Statement For Year Ending December 31 Service Revenue $ Expenses: Total Expenses Net Income $ b. Statement of Retained Earnings (4 answers) Honky Tonk Records Inc. Statement of Retained Earnings For Year Ending December 31 Retained earnings, January 1 +Net income -Dividends Retained earnings, December 31 c. Balance Sheet (20 answers) Honky Tonk Records Inc. Balance Sheet December 31 ASSETS Total Assets LIABILITIES AND EQUITY Total Liabilities Total Equity Total Liabilities and Equity