Exercise 1-19 Preparing financial statements LO 1-3, 1-5 Carolina Company experienced the following events during 2014. 1. Acquired $20,000 cash from the issue of common stock. 2. Paid $22,500 cash to purchase land. 3. Borrowed $10,000 cash. 4. Provided services for $30,000 cash. 5. Paid $2,000 cash for rent expense. 6. Paid $20,000 cash for other operating expenses. 7. Paid a $1,000 cash dividend to the stockholders. 8. Determined that the market value of the land purchased in Event 2 is now $25,000. Required a. The January 1, 2014, general ledger account balances are shown in the following accounting equation. Record the eight events in the appropriate general ledger accounts. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide the appropriate titles for these accounts in the last column of the table. The first event is shown an example. (Enter any decreases to account balances with a minus sign. Select "NA" if there is no effect on the "Account Titles for Retained Earnings".) Assets CAROLINA COMPANY Accounting Equation for 2014 Liabilities Stockholders' Equity Notes Common Retained Payable Stock Earnings 15,000 + 17,500 Event Account Titles for Retained Earnings Cash Land 10,000 + 22,500= + Balance 1/1/2014 1. 20,000 NA 20,000 + (22,500) 2. 22,500 Assets + CAROLINA COMPANY Accounting Equation for 2014 Liabilities Stockholders' Equity Notes Common Retained + Payable Stock Earnings 15,000 + 17,500 Event Account Titles for Retained Earnings Cash + Land = 10.000 + 22.500 = Balance 1/1/2014 1 1. 20,000+ + 20,000 + NA 2. 22.500= + (22,500) + 10,000+ 3. 10,000+ + 4. 30,000+ + 5. - (2.000) (20,000) + (1,000) + 30,000 NA (2.000) Rent expense (20.000) Other operating expenses (1,000) Dividend 6. = + 7. = 1 + 8. + + Totals 24,500 + 45.000 = 10.000 + 35,000 + 24,500 b-1.Prepare an income statement for the 2014 accounting period. CAROLINA COMPANY Income Statement For the Year Ended December 31, 2014 Service revenue $ 30,000 Rent expense (2.000) Other operating expenses (20,000) INA.COR.......................... ..........8.00l Income Statement For the Year Ended December 31, 2014 Service revenue $ 30,000 Rent expense (2,000) Other operating expenses (20,000) INet income $ 8,000 b- 2. Prepare a statement of changes in equity for the 2014 accounting period. CAROLINA COMPANY Statement of Changes in Stockholders' Equity For the Year Ended December 31, 2014 Beginning common stock $ 15,000 Plus: Common stock issued 20,000 Ending common stock $ 35,000 Beginning retained earnings $ 17,500 Plus: Net income 8,000 Less: Dividends (1,000) Ending retained earnings 24,500 Total stockholders' equity $ 59,500 (1,000) Less: Dividends Ending retained earnings Total stockholders' equity 24,500 $ 59,500 b- 3. Prepare a year-end balance sheet for the 2014 accounting period. CAROLINA COMPANY Balance Sheet As of December 31, 2014 Assets Cash $ 24,500 45,000 Land Total assets $ 69,500 Liabilities Notes payable $ 10,000 $ 10,000 Total liabilities Stockholders' Equity Common stock Retained earnings 35,000 24,500 Total stockholders' equity Total liabilities and stockholders' equity 59,500 69,500 $ 59,500 Total stockholders' equity Total liabilities and stockholders' equity $ 69,500 b- Prepare a statement of cash flows for the 2014 accounting period. (Amounts to be 4. deducted should be indicated with a minus sign.) CAROLINA COMPANY Statement of Cash Flows For the Year Ended December 31, 2014 Cash flows from operating activities $ 0 Net cash flow from operating activities Cash flows from investing activities 0 Net cash flow from investing activities Cash flows from financing activities 0 Net cash flow from investing activities Cash flows from financing activities Net cash flow from financing activities 0 Ending cash balance $ 0 c-1. Determine the percentage of assets that were provided by retained earnings. (Round your answer to 1 decimal place. (i.e., .234 should be entered as 23.4).) Percentage of assets % Can you determine the cash in retained earnings? 2. Yes O No
