P1-1A Kinney’s Repair Ltd. was started on May 1.

A summary of May transactions is

presented below. 1. Shareholders invested £10,000 cash in the business in exchange for
ordinary shares. 2. Purchased equipment for £5,000 cash. 3. Paid £400 cash for May offi
ce rent. 4. Paid £700 cash for supplies. 5. Incurred £250 of advertising costs in the
Beacon News on account. 6. Received £4,700 in cash from customers for repair service.
7. Declared and paid a £1,000 cash dividend. 8. Paid part-time employee salaries £1,000.
9. Paid utility bills £160. 10. Performed repair service worth £980 on account. 11.
Collected cash of £120 for services billed in transaction (10). Instructions (a) Prepare a
tabular analysis of the transactions, using the following column headings: Cash,
Accounts Receivable, Supplies, Equipment, Accounts Payable, Share Capital, and
Retained Earnings (with separate columns for Revenues, Expenses, and Dividends).
Include margin explanations for any changes in Retained Earnings. Revenue is called
Service Revenue. (b) From an analysis of the Retained Earnings columns, compute the
net income or net loss for May.

(a) Tabular Analysis of the Transactions

We will go through each transaction and show the effect on the respective
accounts under the headings: Cash, Accounts Receivable, Supplies, Equipment,
Accounts Payable, Share Capital, and Retained Earnings. The Retained Earnings
column will include sub-columns for Revenues, Expenses, and Dividends.

Here is the breakdown:

Accoun Accou Servi Retain

Share
Da ts Suppl Equipm nts ce Expense Divide ed
Cash Capit
te Receiva ies ent Payab Reven s nds Earni
al
ble le ue ngs
Ma +£10,0 +£10,0
y 1 00 00
Ma -
+£5,000
y 2 £5,000
Ma +£400
-£400
y3 (Rent)
+£700
Ma
-£700 +£700 (Supplies
y4
)
+£250
Ma
+£250 (Advertis
y5
ing)
Ma +£4,7 +£4,7
y 6 00 00
+£1,00
Ma - 0
y 7 £1,000 (Divide
nd)
Ma - +£1,000
 Accoun Accou Servi Retain
Share
Da ts Suppl Equipm nts ce Expense Divide ed
Cash Capit
te Receiva ies ent Payab Reven s nds Earni
al
ble le ue ngs
y 8 £1,000 (Salaries
)
Ma +£160
-£160
y9 (Utilities)
Ma
y +£980 +£980
10
Ma
y +£120 -£120
11

Explanation of Changes:

1. May 1: Shareholders invested £10,000 cash.

o Cash: +£10,000
o Share Capital: +£10,000
2. May 2: Purchased equipment for £5,000 cash.
o Cash: -£5,000
o Equipment: +£5,000
3. May 3: Paid £400 cash for May office rent.
o Cash: -£400
o Expenses (Rent): +£400
o Retained Earnings: -£400 (Increase in expense, which decreases
retained earnings)
4. May 4: Paid £700 cash for supplies.
o Cash: -£700
o Supplies: +£700
5. May 5: Incurred £250 of advertising costs on account.
o Accounts Payable: +£250
o Expenses (Advertising): +£250
o Retained Earnings: -£250 (Increase in expense, which decreases
retained earnings)
6. May 6: Received £4,700 in cash for repair service.
o Cash: +£4,700
o Service Revenue: +£4,700
o Retained Earnings: +£4,700 (Increase in revenue, which increases
retained earnings)
7. May 7: Declared and paid a £1,000 cash dividend.
o Cash: -£1,000
o Dividends: +£1,000
o Retained Earnings: -£1,000 (Dividends decrease retained earnings)
8. May 8: Paid part-time employee salaries £1,000.
o Cash: -£1,000
o Expenses (Salaries): +£1,000
o Retained Earnings: -£1,000 (Increase in expense, which decreases
retained earnings)
9. May 9: Paid utility bills £160.
 o Cash: -£160
o Expenses (Utilities): +£160
o Retained Earnings: -£160 (Increase in expense, which decreases
retained earnings)
10.May 10: Performed repair service worth £980 on account.
o Accounts Receivable: +£980
o Service Revenue: +£980
o Retained Earnings: +£980 (Increase in revenue, which increases
retained earnings)
11. May 11: Collected £120 in cash for services billed in transaction (10).
o Cash: +£120
o Accounts Receivable: -£120
o Retained Earnings: (No effect on retained earnings directly as it's a
cash collection of an amount already recognized as revenue)

(b) Compute Net Income for May

To calculate the net income for May, we need to look at the revenues and
expenses in the Retained Earnings columns.

 Service Revenue: £4,700 (from May 6) + £980 (from May 10) = £5,680
 Expenses:
o Rent: £400
o Supplies: £700
o Advertising: £250
o Salaries: £1,000
o Utilities: £160
o Total Expenses = £400 + £700 + £250 + £1,000 + £160 = £2,510

Now, calculate Net Income:

Net Income=Service Revenue−Expenses\text{Net Income} = \text{Service

Revenue} - \text{Expenses} Net Income=£5,680−£2,510=£3,170\text{Net
Income} = £5,680 - £2,510 = £3,170

So, the net income for May is £3,170.

P1-2A On August 31, 2017, the statement of fi nancial position of Donahue Veterinary
Clinic Ltd. showed Cash £9,000, Accounts Receivable £1,700, Supplies £600, Equipment
£6,000, Accounts Payable £3,600, Share Capital—Ordinary £13,000, and Retained
Earnings £700. During September, the following transactions occurred. 1. Paid £2,900
cash for accounts payable due. 2. Collected £1,300 of accounts receivable. 3. Purchased
additional equipment for £2,100, paying £800 in cash and the balance on account. 4.
Recognized revenue of £7,300, of which £2,500 is collected in cash and the balance is
due in October. 5. Declared and paid a £400 cash dividend. 6. Paid salaries £1,700, rent
for September £900, and advertising expense £200. 7. Incurred utilities expense for
month on account £170. 8. Received £10,000 from Capital Bank on a 6-month note
payable. Instructions (a) Prepare a tabular analysis of the September transactions
beginning with August 31 balances. The column headings should be as follows: Cash +
Accounts Receivable + Supplies + Equipment = Notes Payable + Accounts Payable +
Share Capital + Retained Earnings + Revenues − Expenses − Dividends. (b) Prepare an
income statement for September, a retained earnings statement for September, and a
statement of financial position at September 30, 2017.

Part (a): Tabular Analysis of September Transactions

We'll start with the balances on August 31, 2017, and apply each of the
transactions step by step. The columns will represent the following financial
items:

1. Cash
2. Accounts Receivable
3. Supplies
4. Equipment
5. Notes Payable
6. Accounts Payable
7. Share Capital
8. Retained Earnings
9. Revenues
10. Expenses
11. Dividends

Initial Balances (August 31, 2017):

 Cash: £9,000
 Accounts Receivable: £1,700
 Supplies: £600
 Equipment: £6,000
 Accounts Payable: £3,600
 Share Capital: £13,000
 Retained Earnings: £700

We’ll now record the transactions:

 Accoun Accou Shar Retai
Notes
Transac ts Suppl Equip nts e ned Reven Expen Divide
Cash Payab
tion Receiv ies ment Payab Capit Earni ues ses nds
le
able le al ngs

Initial
Balance £9,00 £13,0
£1,700 £600 £6,000 £0 £3,600 £700 £0 £0 £0
s (Aug 0 00
31)

1. Paid
£2,900
-
cash for -
£2,90 £0 £0 £0 £0 £0 £0 £0 £0 £0
account £2,900
0
s
payable

2.
Collecte
d £1,300
of +£1,3
-£1,300 £0 £0 £0 £0 £0 £0 £0 £0 £0
account 00
s
receiva
ble

3.
Purchas
ed
addition
al
equipm -£800 £0 £0 +£2,100 £0 £0 £0 £0 £0 £0 £0
ent for
£2,100,
paying
£800 in
cash

4.
Recogni
zed
revenue
of
+£2,5 +£7,3
£7,300, +£4,800 £0 £0 £0 £0 £0 £7,300 £0 £0
00 00
£2,500
in cash,
balance
on
account
 Accoun Accou Shar Retai
Notes
Transac ts Suppl Equip nts e ned Reven Expen Divide
Cash Payab
tion Receiv ies ment Payab Capit Earni ues ses nds
le
able le al ngs

5.
Declare
d and
paid a
-£400 £0 £0 £0 £0 £0 £0 -£400 £0 £0 +£400
£400
cash
dividen
d

6. Paid
salaries
£1,700,
rent - -
£900, £2,80 £0 £0 £0 £0 £0 £0 £2,80 £0 £2,800 £0
and 0 0
advertis
ing
£200

7.
Incurre
d
utilities £0 £0 £0 £0 £0 £170 £0 -£170 £0 £170 £0
expense
£170 on
account

8.
Receive
d
£10,000
from
+£10, +£10,
Capital £0 £0 £0 £0 £0 £0 £0 £0 £0
000 000
Bank on
a 6-
month
note
payable
Updated Balances After Transactions:
Accoun Accou Shar Retain
Notes
Acco ts Suppl Equipm nts e ed Reven Expen Divide
Cash Paya
unt Receiva ies ent Payabl Capit Earni ues ses nds
ble
ble e al ngs

Final
£16,0 £10,0 £13,0
Balan £5,200 £600 £8,100 £900 £6,830 £7,300 £2,970 £400
00 00 00
ce

Part (b): Financial Statements for September

Income Statement for September 2017

The income statement is prepared by recognizing revenues and subtracting the

expenses for the period:

Revenues:

 Recognized revenue: £7,300

Expenses:

 Salaries: £1,700
 Rent: £900
 Advertising: £200
 Utilities: £170

Total Expenses:

 £1,700 + £900 + £200 + £170 = £2,970

Net Income:

 Revenues - Expenses = £7,300 - £2,970 = £4,330

Retained Earnings Statement for September 2017

The retained earnings at the end of September are calculated using the
beginning balance, adding net income, and subtracting dividends.

Retained Earnings at August 31, 2017: £700

Net Income for September: £4,330

Dividends Declared and Paid: £400

Retained Earnings at September 30, 2017:

  £700 + £4,330 - £400 = £4,630

Statement of Financial Position at September 30, 2017

The statement of financial position is divided into assets, liabilities, and equity.

Assets:

 Cash: £16,000
 Accounts Receivable: £5,200
 Supplies: £600
 Equipment: £8,100

Total Assets: £16,000 + £5,200 + £600 + £8,100 = £29,900

Liabilities:

 Notes Payable: £10,000

 Accounts Payable: £900

Total Liabilities: £10,000 + £900 = £10,900

Equity:

 Share Capital: £13,000

 Retained Earnings: £4,630

Total Equity: £13,000 + £4,630 = £17,630

Total Liabilities and Equity: £10,900 + £17,630 = £29,900

Summary of Financial Statements

1. Income Statement:
o Revenues: £7,300
o Expenses: £2,970
o Net Income: £4,330
2. Retained Earnings Statement:
o Beginning Retained Earnings: £700
o Net Income: £4,330
o Dividends: £400
o Ending Retained Earnings: £4,630
3. Statement of Financial Position:
o Total Assets: £29,900
o Total Liabilities: £10,900
o Total Equity: £17,630

Let me know if you need any further breakdown or details!

P1-3A On May 1, 2017, Park Flying School Ltd., a company that provides fl ying lessons,
was started with an investment of W45,000 cash in the business. Following are the
assets and liabilities of the company on May 31, 2017, and the revenues and expenses
for the month of May (all amounts in thousands). Cash W 4,500 Notes Payable W28,000
Accounts Receivable 7,420 Rent Expense 1,000 Equipment 64,000 Maintenance and
Service Revenue 6,800 Repairs Expense 400 Advertising Expense 500 Gasoline
Expense 2,500 Accounts Payable 1,400 Utilities Expense 400 No additional investments
were made in May, but the company paid dividends of W 480,000 during the month.
Instructions (a) Prepare an income statement and a retained earnings statement for the
month of May and a statement of financial position at May 31. (Show numbers in
thousands.) (b) Prepare an income statement and a retained earnings statement for May
assuming the following data are not included above: (1) W 900,000 worth of services
were performed and billed but not collected at May 31, and (2) W1,500,000 of gasoline
expense was incurred but not paid.

Let's break down the steps to prepare the financial statements based on the data
provided:

(a) Prepare the income statement, retained earnings statement, and

statement of financial position.

Income Statement (For the month of May):

The income statement shows the company's revenues and expenses for the
month of May.

Revenues:

 Maintenance and Service Revenue: W6,800,000

Expenses:

 Rent Expense: W1,000,000

 Repairs Expense: W400,000
 Advertising Expense: W500,000
 Gasoline Expense: W2,500,000
 Utilities Expense: W400,000

Net Income Calculation:

Net Income=Revenues−Expenses\text{Net Income} = \text{Revenues} - \text{Expenses}

Net Income=W6,800,000−(W1,000,000+W400,000+W500,000+W2,500,000+W400,000)\t
ext{Net Income} = W6,800,000 - (W1,000,000 + W400,000 + W500,000 + W2,500,000 +
W400,000) Net Income=W6,800,000−W4,800,000=W2,000,000\text{Net Income} =
W6,800,000 - W4,800,000 = W2,000,000

Income Statement:
RevenuesW6,800,000ExpensesRent ExpenseW1,000,000Repairs ExpenseW400,000Adv
ertising ExpenseW500,000Gasoline ExpenseW2,500,000Utilities ExpenseW400,000Tota
l ExpensesW4,800,000Net IncomeW2,000,000\begin{array}{|l|r|} \hline
\textbf{Revenues} & W6,800,000 \\ \hline \textbf{Expenses} & \\ \text{Rent Expense} &
W1,000,000 \\ \text{Repairs Expense} & W400,000 \\ \text{Advertising Expense} &
W500,000 \\ \text{Gasoline Expense} & W2,500,000 \\ \text{Utilities Expense} &
W400,000 \\ \hline \textbf{Total Expenses} & W4,800,000 \\ \hline \textbf{Net Income} &
W2,000,000 \\ \hline \end{array}

Retained Earnings Statement (For the month of May):

We begin with the beginning balance of retained earnings, which is zero since
the business started in May. Then, we add the net income and subtract any
dividends paid.

Beginning Retained Earnings=0\text{Beginning Retained Earnings} = 0

Net Income=W2,000,000\text{Net Income} = W2,000,000
Dividends=W480,000\text{Dividends} = W480,000
Ending Retained Earnings=Beginning Retained Earnings+Net Income−Dividends\text{
Ending Retained Earnings} = \text{Beginning Retained Earnings} + \text{Net Income} -
\text{Dividends}
Ending Retained Earnings=0+W2,000,000−W480,000=W1,520,000\text{Ending
Retained Earnings} = 0 + W2,000,000 - W480,000 = W1,520,000

Retained Earnings Statement:

Beginning Retained Earnings0Net IncomeW2,000,000DividendsW480,000Ending Retai

ned EarningsW1,520,000\begin{array}{|l|r|} \hline \textbf{Beginning Retained
Earnings} & 0 \\ \hline \textbf{Net Income} & W2,000,000 \\ \hline \textbf{Dividends} &
W480,000 \\ \hline \textbf{Ending Retained Earnings} & W1,520,000 \\ \hline
\end{array}

Statement of Financial Position (As of May 31, 2017):

We will list all assets, liabilities, and equity.

Assets:

 Cash: W4,500,000
 Accounts Receivable: W7,420,000
 Equipment: W64,000,000

Liabilities:

 Notes Payable: W28,000,000

 Accounts Payable: W1,400,000
Equity:

 Share Capital (Initial Investment): W45,000,000

 Retained Earnings (from above): W1,520,000

Statement of Financial Position:

AssetsCashW4,500,000Accounts ReceivableW7,420,000EquipmentW64,000,000Total As
setsW75,920,000LiabilitiesNotes PayableW28,000,000Accounts PayableW1,400,000Tot
al LiabilitiesW29,400,000EquityShare CapitalW45,000,000Retained EarningsW1,520,00
0Total EquityW46,520,000Total Liabilities and EquityW75,920,000\begin{array}{|l|r|}
\hline \textbf{Assets} & \\ \text{Cash} & W4,500,000 \\ \text{Accounts Receivable} &
W7,420,000 \\ \text{Equipment} & W64,000,000 \\ \hline \textbf{Total Assets} &
W75,920,000 \\ \hline \textbf{Liabilities} & \\ \text{Notes Payable} & W28,000,000 \\
\text{Accounts Payable} & W1,400,000 \\ \hline \textbf{Total Liabilities} & W29,400,000
\\ \hline \textbf{Equity} & \\ \text{Share Capital} & W45,000,000 \\ \text{Retained
Earnings} & W1,520,000 \\ \hline \textbf{Total Equity} & W46,520,000 \\ \hline
\textbf{Total Liabilities and Equity} & W75,920,000 \\ \hline \end{array}

(b) Income Statement and Retained Earnings Statement, adjusted for

additional data:

We are now adjusting for:

1. W900,000 worth of services performed but not collected at May 31.

2. W1,500,000 of gasoline expense incurred but not paid.

Adjusted Income Statement:

Revenues:

 Maintenance and Service Revenue: W6,800,000

 Additional Revenues (uncollected): W900,000
Adjusted Revenues=W6,800,000+W900,000=W7,700,000\text{Adjusted
Revenues} = W6,800,000 + W900,000 = W7,700,000

Expenses:

 Gasoline Expense: W2,500,000

 Additional Gasoline Expense (incurred but not paid): W1,500,000
Adjusted Gasoline Expense=W2,500,000+W1,500,000=W4,000,000\text{Adjusted
Gasoline Expense} = W2,500,000 + W1,500,000 = W4,000,000

Net Income Calculation:

Adjusted Net Income=Adjusted Revenues−(Rent Expense+Repairs Expense+Advertising

Expense+Adjusted Gasoline Expense+Utilities Expense)\text{Adjusted Net Income} =
\text{Adjusted Revenues} - (\text{Rent Expense} + \text{Repairs Expense} +
\text{Advertising Expense} + \text{Adjusted Gasoline Expense} + \text{Utilities
Expense})
Adjusted Net Income=W7,700,000−(W1,000,000+W400,000+W500,000+W4,000,000+W4
00,000)\text{Adjusted Net Income} = W7,700,000 - (W1,000,000 + W400,000 + W500,000
+ W4,000,000 + W400,000)
Adjusted Net Income=W7,700,000−W6,300,000=W1,400,000\text{Adjusted Net Income}
= W7,700,000 - W6,300,000 = W1,400,000

Adjusted Income Statement:

RevenuesW7,700,000ExpensesRent ExpenseW1,000,000Repairs ExpenseW400,000Adv

ertising ExpenseW500,000Adjusted Gasoline ExpenseW4,000,000Utilities ExpenseW40
0,000Total ExpensesW6,300,000Net IncomeW1,400,000\begin{array}{|l|r|} \hline
\textbf{Revenues} & W7,700,000 \\ \hline \textbf{Expenses} & \\ \text{Rent Expense} &
W1,000,000 \\ \text{Repairs Expense} & W400,000 \\ \text{Advertising Expense} &
W500,000 \\ \text{Adjusted Gasoline Expense} & W4,000,000 \\ \text{Utilities Expense}
& W400,000 \\ \hline \textbf{Total Expenses} & W6,300,000 \\ \hline \textbf{Net Income}
& W1,400,000 \\ \hline \end{array}

Adjusted Retained Earnings Statement:

Beginning Retained Earnings=0\text{Beginning Retained Earnings} = 0
Adjusted Net Income=W1,400,000\text{Adjusted Net Income} = W1,400,000
Dividends=W480,000\text{Dividends} = W480,000
Ending Retained Earnings=0+W1,400,000−W480,000=W920,000\text{Ending Retained
Earnings} = 0 + W1,400,000 - W480,000 = W920,000

Adjusted Retained Earnings Statement:

Beginning Retained Earnings0Adjusted Net IncomeW1,400,000DividendsW480,000End

ing Retained EarningsW920,000\begin{array}{|l|r|} \hline \textbf{Beginning Retained
Earnings} & 0 \\ \hline \textbf{Adjusted Net Income} & W1,400,000 \\ \hline
\textbf{Dividends} & W480,000 \\ \hline \textbf{Ending Retained Earnings} & W920,000
\\ \hline \end{array}

This should give you the complete set of adjusted financial statements. Let me
know if you need further clarification on any of the steps!
P1-4A Matt Stiner started a delivery service, Stiner Deliveries Ltd., on June 1, 2017. The
following transactions occurred during the month of June. June 1 Shareholders
invested £10,000 cash in the business in exchange for ordinary shares. 2 Purchased a
used van for deliveries for £14,000. Matt paid £2,000 cash and signed a note payable for
the remaining balance. 3 Paid £500 for offi ce rent for the month. 5 Performed services
worth £4,800 on account. 9 Declared and paid £300 in cash dividends. 12 Purchased
supplies for £150 on account. 15 Received a cash payment of £1,250 for services
performed on June 5. 17 Purchased gasoline for £100 on account. 20 Received a cash
payment of £1,500 for services performed. 23 Made a cash payment of £500 on the note
payable. 26 Paid £250 for utilities. 29 Paid for the gasoline purchased on account on
June 17. 30 Paid £1,000 for employee salaries.

Instructions (a) Show the effects of the previous transactions on the accounting
equation using the following format. Assets = Liabilities + Equity Accounts Notes
Accounts Share Retained Earnings Date Cash + Receivable + Supplies + Equipment =
Payable + Payable + Capital + Rev. − Exp. − Div. Include margin explanations for any
changes in the Retained Earnings account in your analysis. (b) Prepare an income
statement for the month of June. (c) Prepare a statement of fi nancial position at June 30,
2017.

(a) Show the effects of the transactions on the accounting equation.

Let’s break down the effects of each transaction on the accounting equation:

Accounting Equation:

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

Where:

 Assets = Cash + Accounts Receivable + Supplies + Equipment

 Liabilities = Notes Payable + Accounts Payable
 Equity = Share Capital + Retained Earnings
o Retained Earnings will be updated based on Revenues, Expenses, and
Dividends.

June 1:

 Transaction: Shareholders invested £10,000 in exchange for ordinary shares.

o Cash increases by £10,000.
o Share Capital increases by £10,000.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

10,000=0+10,00010,000 = 0 + 10,000
June 2:

 Transaction: Purchased a used van for £14,000. Paid £2,000 in cash and signed a
note payable for £12,000.
o Cash decreases by £2,000.
o Equipment (Van) increases by £14,000.
o Notes Payable increases by £12,000.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

8,000(Cash)+14,000(Van)=12,000(Notes Payable)+10,000(Share Capital)8,000
(\text{Cash}) + 14,000 (\text{Van}) = 12,000 (\text{Notes Payable}) + 10,000 (\text{Share
Capital})

June 3:

 Transaction: Paid £500 for office rent.

o Cash decreases by £500.
o Rent Expense decreases Retained Earnings by £500.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

7,500(Cash)=12,000(Notes Payable)+10,000(Share Capital)−500(Retained Earnings)7,500
(\text{Cash}) = 12,000 (\text{Notes Payable}) + 10,000 (\text{Share Capital}) - 500
(\text{Retained Earnings})

June 5:

 Transaction: Performed services worth £4,800 on account.

o Accounts Receivable increases by £4,800.
o Revenue increases Retained Earnings by £4,800.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

7,500(Cash)+4,800(Receivable)=12,000(Notes Payable)+10,000(Share Capital)+4,800(Rev
enue)7,500 (\text{Cash}) + 4,800 (\text{Receivable}) = 12,000 (\text{Notes Payable}) +
10,000 (\text{Share Capital}) + 4,800 (\text{Revenue})

June 9:

 Transaction: Declared and paid £300 in dividends.

o Cash decreases by £300.
o Retained Earnings decreases by £300.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

7,200(Cash)=12,000(Notes Payable)+10,000(Share Capital)+4,800(Revenue)−300(Dividen
ds)7,200 (\text{Cash}) = 12,000 (\text{Notes Payable}) + 10,000 (\text{Share Capital}) +
4,800 (\text{Revenue}) - 300 (\text{Dividends})

June 12:

 Transaction: Purchased supplies for £150 on account.

o Supplies increases by £150.
o Accounts Payable increases by £150.
Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}
7,200(Cash)+150(Supplies)=12,150(Accounts Payable)+10,000(Share Capital)+4,800(Rev
enue)−300(Dividends)7,200 (\text{Cash}) + 150 (\text{Supplies}) = 12,150 (\text{Accounts
Payable}) + 10,000 (\text{Share Capital}) + 4,800 (\text{Revenue}) - 300
(\text{Dividends})

June 15:

 Transaction: Received a cash payment of £1,250 for services performed on June

5.
o Cash increases by £1,250.
o Accounts Receivable decreases by £1,250.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

8,450(Cash)+0(Receivable)+150(Supplies)=12,150(Accounts Payable)+10,000(Share Capi
tal)+6,050(Revenue)−300(Dividends)8,450 (\text{Cash}) + 0 (\text{Receivable}) + 150
(\text{Supplies}) = 12,150 (\text{Accounts Payable}) + 10,000 (\text{Share Capital}) +
6,050 (\text{Revenue}) - 300 (\text{Dividends})

June 17:

 Transaction: Purchased gasoline for £100 on account.

o Supplies (Gasoline) increases by £100.
o Accounts Payable increases by £100.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

8,450(Cash)+150(Supplies)+100(Gasoline)=12,250(Accounts Payable)+10,000(Share Capi
tal)+6,050(Revenue)−300(Dividends)8,450 (\text{Cash}) + 150 (\text{Supplies}) + 100
(\text{Gasoline}) = 12,250 (\text{Accounts Payable}) + 10,000 (\text{Share Capital}) +
6,050 (\text{Revenue}) - 300 (\text{Dividends})

June 20:

 Transaction: Received a cash payment of £1,500 for services performed.

o Cash increases by £1,500.
o Revenue increases Retained Earnings by £1,500.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

9,950(Cash)+150(Supplies)+100(Gasoline)=12,250(Accounts Payable)+10,000(Share Capi
tal)+7,550(Revenue)−300(Dividends)9,950 (\text{Cash}) + 150 (\text{Supplies}) + 100
(\text{Gasoline}) = 12,250 (\text{Accounts Payable}) + 10,000 (\text{Share Capital}) +
7,550 (\text{Revenue}) - 300 (\text{Dividends})

June 23:

 Transaction: Made a cash payment of £500 on the note payable.

o Cash decreases by £500.
o Notes Payable decreases by £500.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

9,450(Cash)+150(Supplies)+100(Gasoline)=11,750(Notes Payable)+10,000(Share Capital)
+7,550(Revenue)−300(Dividends)9,450 (\text{Cash}) + 150 (\text{Supplies}) + 100
(\text{Gasoline}) = 11,750 (\text{Notes Payable}) + 10,000 (\text{Share Capital}) + 7,550
(\text{Revenue}) - 300 (\text{Dividends})

June 26:

 Transaction: Paid £250 for utilities.

o Cash decreases by £250.
o Utility Expense decreases Retained Earnings by £250.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

9,200(Cash)+150(Supplies)+100(Gasoline)=11,750(Notes Payable)+10,000(Share Capital)
+7,550(Revenue)−550(Retained Earnings after Expense)9,200 (\text{Cash}) + 150
(\text{Supplies}) + 100 (\text{Gasoline}) = 11,750 (\text{Notes Payable}) + 10,000
(\text{Share Capital}) + 7,550 (\text{Revenue}) - 550 (\text{Retained Earnings after
Expense})

June 29:

 Transaction: Paid for the gasoline purchased on June 17.

o Cash decreases by £100.
o Accounts Payable decreases by £100.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

9,100(Cash)+150(Supplies)=11,650(Accounts Payable)+10,000(Share Capital)+7,550(Rev
enue)−550(Retained Earnings)9,100 (\text{Cash}) + 150 (\text{Supplies}) = 11,650
(\text{Accounts Payable}) + 10,000 (\text{Share Capital}) + 7,550 (\text{Revenue}) - 550
(\text{Retained Earnings})

June 30:

 Transaction: Paid £1,000 for employee salaries.

o Cash decreases by £1,000.
o Salaries Expense decreases Retained Earnings by £1,000.

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

8,100(Cash)+150(Supplies)=11,650(Accounts Payable)+10,000(Share Capital)+7,550(Reve
nue)−1,550(Retained Earnings after Expenses)8,100 (\text{Cash}) + 150 (\text{Supplies})
= 11,650 (\text{Accounts Payable}) + 10,000 (\text{Share Capital}) + 7,550
(\text{Revenue}) - 1,550 (\text{Retained Earnings after Expenses})

(b) Income Statement for June 2017:

Revenues:\text{Revenues:}
Revenue from Services=£4,800+£1,500=£6,300\text{Revenue from Services} = £4,800 +
£1,500 = £6,300 Expenses:\text{Expenses:} Rent Expense=£500\text{Rent Expense} =
£500 Utility Expense=£250\text{Utility Expense} = £250
Salaries Expense=£1,000\text{Salaries Expense} = £1,000 Net Income:\text{Net
Income:} Net Income=Revenue−Expenses=6,300−(500+250+1,000)=4,550\text{Net
Income} = \text{Revenue} - \text{Expenses} = 6,300 - (500 + 250 + 1,000) = 4,550
(c) Statement of Financial Position as of June 30, 2017:

Assets:

 Cash: £8,100
 Accounts Receivable: £0
 Supplies: £150
 Equipment (Van): £14,000

Total Assets=£8,100+£0+£150+£14,000=£22,250\text{Total Assets} = £8,100 + £0 + £150

+ £14,000 = £22,250
P1-5A Financial statement information about four different companies is as follows.

Crosby Stills Nash Young Company Company Company Company January 1, 2017 Assets
HK$ 900,000 HK$1,100,000 (g) HK$1,500,000 Liabilities 650,000 (d) HK$ 750,000 (j)
Equity (a) 500,000 450,000 1,000,000 December 31, 2017 Assets (b) 1,370,000 2,000,000
(k) Liabilities 550,000 750,000 (h) 800,000 Equity 400,000 (e) 1,300,000 1,400,000 Equity
changes in year Additional investment (c) 150,000 100,000 150,000 Dividends 100,000 (f)
140,000 100,000 Total revenues 3,500,000 4,200,000 (i) 5,000,000 Total expenses
3,300,000 3,850,000 3,420,000 (l) Instructions (a) Determine the missing amounts. (Hint:
For example, to solve for (a), Assets − Liabilities = Equity = HK$250,000.) (b) Prepare the
retained earnings statement for Stills Company. Assume beginning retained earnings
was HK$200,000. (c) Write a memorandum explaining the sequence for preparing
financial statements and the interrelationship of the retained earnings statement to the
income statement and statement of financial position.

To answer this question, let's break down each part and determine the missing
information.

Part (a) - Determine the missing amounts.

We are given a lot of financial data for four companies, but some values are
missing. We can calculate the missing values using basic accounting formulas.
The key formula here is the accounting equation:

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

We'll solve for the missing values one at a time.

Crosby Company:

1. Equity (a)
We know that:

Assets−Liabilities=Equity\text{Assets} - \text{Liabilities} = \text{Equity}

900,000−650,000=Equity900,000 - 650,000 = \text{Equity}
Equity=250,000\text{Equity} = 250,000

So, Equity for Crosby Company (a) is HK$250,000.

2. Assets (b)
The formula for equity can be rearranged:

Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \text{Equity}

At December 31, 2017:

Assets=550,000+400,000=950,000\text{Assets} = 550,000 + 400,000 = 950,000

 So, Assets for Crosby Company (b) is HK$950,000.

Stills Company:

3. Liabilities (d)
We know that:

Assets−Liabilities=Equity\text{Assets} - \text{Liabilities} = \text{Equity}

1,100,000−Liabilities=500,0001,100,000 - \text{Liabilities} = 500,000

Solving for liabilities:

Liabilities=1,100,000−500,000=600,000\text{Liabilities} = 1,100,000 - 500,000 =

600,000

So, Liabilities for Stills Company (d) is HK$600,000.

4. Equity (e)
At December 31, 2017:

Equity=1,370,000−750,000=620,000\text{Equity} = 1,370,000 - 750,000 = 620,000

So, Equity for Stills Company (e) is HK$620,000.

Nash Company:

5. Liabilities (f)
We know:

Assets−Liabilities=Equity\text{Assets} - \text{Liabilities} = \text{Equity}

1,500,000−Liabilities=450,0001,500,000 - \text{Liabilities} = 450,000

Solving for liabilities:

Liabilities=1,500,000−450,000=1,050,000\text{Liabilities} = 1,500,000 - 450,000 =

1,050,000

So, Liabilities for Nash Company (f) is HK$1,050,000.

6. Revenues (i)
From the income statement for Nash Company:

Revenues=Expenses+Net Income\text{Revenues} = \text{Expenses} + \text{Net

Income}

Net Income can be calculated as:

Net Income=Revenues−Expenses=4,200,000−3,850,000=350,000\text{Net
Income} = \text{Revenues} - \text{Expenses} = 4,200,000 - 3,850,000 = 350,000
 Therefore, Revenues for Nash Company (i) is HK$4,200,000.

Young Company:

7. Liabilities (h)
We know:

Assets−Liabilities=Equity\text{Assets} - \text{Liabilities} = \text{Equity}

2,000,000−Liabilities=1,300,0002,000,000 - \text{Liabilities} = 1,300,000

Solving for liabilities:

Liabilities=2,000,000−1,300,000=700,000\text{Liabilities} = 2,000,000 - 1,300,000

= 700,000

So, Liabilities for Young Company (h) is HK$700,000.

8. Equity (j)
At December 31, 2017:

Equity=2,000,000−800,000=1,200,000\text{Equity} = 2,000,000 - 800,000 =

1,200,000

So, Equity for Young Company (j) is HK$1,200,000.

9. Assets (k)
At December 31, 2017:

Assets=Liabilities+Equity=800,000+1,400,000=2,200,000\text{Assets} =
\text{Liabilities} + \text{Equity} = 800,000 + 1,400,000 = 2,200,000

So, Assets for Young Company (k) is HK$2,200,000.

Crosby Company:

10. Equity (l)

From the total expenses and revenue for Crosby, the net income can be
computed as:

Net Income=Revenues−Expenses=3,500,000−3,300,000=200,000\text{Net Income} =

\text{Revenues} - \text{Expenses} = 3,500,000 - 3,300,000 = 200,000

This means the equity balance for Crosby Company was HK$200,000.

Part (b) - Retained Earnings Statement for Stills Company

Stills Company Retained Earnings Statement:

Retained Earnings at January 1, 2017=200,000\text{Retained Earnings at January 1,

2017} = 200,000
Add: Net Income for 2017=Revenues−Expenses=4,200,000−3,850,000=350,000\text{Add:
Net Income for 2017} = \text{Revenues} - \text{Expenses} = 4,200,000 - 3,850,000 =
350,000 Less: Dividends=140,000\text{Less: Dividends} = 140,000
Retained Earnings at December 31, 2017=200,000+350,000−140,000=410,000\text{Reta
ined Earnings at December 31, 2017} = 200,000 + 350,000 - 140,000 = 410,000

So, the Retained Earnings Statement is:

Particulars Amount (HK$)

Retained Earnings at January 1, 2017 200,000

Add: Net Income 350,000

Less: Dividends (140,000)

Retained Earnings at December 31, 2017 410,000

Part (c) - Memorandum Explanation

Sequence for Preparing Financial Statements:

1. Income Statement: The income statement is prepared first. It reports a

company's revenues and expenses for a specific period, leading to the
determination of the net income or loss.
2. Retained Earnings Statement: Next, the retained earnings statement is
prepared. It starts with the beginning retained earnings, adds net income
(or subtracts net loss) from the income statement, and subtracts any
dividends paid. The ending retained earnings are then calculated.
3. Statement of Financial Position: Finally, the statement of financial
position (or balance sheet) is prepared. It summarizes the company’s
assets, liabilities, and equity as of a specific date. The ending retained
earnings from the retained earnings statement are used in this statement
to calculate equity.

Interrelationship:

 The income statement determines the net income, which flows into the retained
earnings statement.
 The retained earnings statement adjusts the beginning retained earnings based
on the net income or loss, and subtracts any dividends, leading to the ending
retained earnings, which is reported on the statement of financial position.
 The net income from the income statement and the ending retained earnings are
critical in determining the overall financial position (assets, liabilities, and equity)
at the end of the period.

I hope that helps! Let me know if you need further clarification on any part.