SOLUTION MANUAL FOR Financial Accounting 11th Edition By Robert Libby, Patricia Libby, Frank Hodge / Complete All Chapters

Net income for the year was $12,300. This is the first year of operations and no dividends were declared or paid to stockholders; therefore, the ending retained earnings of $12,300 includes net income for one year. E1–6. CAMPUS CONNECTION Income Statement For the Month of January, Current Year Revenues: Sales: Cash $150,000 On credit 2,500 Total sales revenue $152,500 Expenses: Cost of goods sold 70,000 Salaries, rent, supplies, and other expenses (paid in cash) 37,000 Utilities 900 Total expenses 107,900 Net Income $ 44,600 Financial Accounting, 11/e 2-11 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. E1–7. SYSCO CORP. Income Statement For the Year Ended June 30, Current Year (in millions) Revenues: Sales $55,371 Other revenues 16 Total revenues $55,387 Expenses: Cost of sales 44,814 Selling, general and administration expense 8,504 Interest expense 303 Total expenses 53,621 Earnings before income taxes 1,766 Income taxes 371 Net earnings $ 1,395 E1–8. NEIGHBORHOOD REALTY, INCORPORATED Income Statement For the Year Ended December 31, Current Year Revenues Commissions earned ($150,900+$16,800) $167,700 Rental service fees 20,000 Total revenues $187,700 Expenses Salaries expense 62,740 Commission expense 35,330 Payroll tax expense 2,500 Rent expense ($2,475+$225)* 2,700 Utilities expense 1,600 Promotion and advertising expense 7,750 Miscellaneous expenses 500 Total expenses (excluding income taxes) 113,120 Pretax income 74,580 Income tax expense 15,660 Net Income $ 58,920 *$2,475 has been paid for 11 months ($225 per month) plus $225 owed for December. 2-12 Solutions Manual © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. E1–9. Net Income (or Loss) = Revenues - Expenses Assets = Liabilities + Stockholders’ Equity A Net Income = $93,500 - $75,940 = $17,560; Stockholders’ Equity = $140,200 - $56,500 = $83,700. B Total Revenues = $75,834 + $14,740 = $90,574; Total Liabilities = $107,880 - $77,500 = $30,380. C Net Loss = $68,120 - $76,430 = ($8,310); Stockholders’ Equity = $98,200 - $69,850 = $28,350. D Total Expenses = $55,804 - $21,770 = $34,034; Total Assets = $20,300 + $78,680 = $98,980. E Net Income = $84,840 - $75,320 = $9,520; Total Assets = $25,520 + $80,000 = $105,520. E1–10. Net Income (or Loss) = Revenues - Expenses Assets = Liabilities + Stockholders’ Equity A Net Income = $242,300 - $196,700 = $45,600; Stockholders’ Equity = $253,500 - $75,000 = $178,500. B Total Revenues = $186,500 + $29,920 = $216,420; Total Liabilities = $590,000 - $350,600 = $239,400. C Net Loss = $73,500 - $91,890 = ($18,390); Stockholders’ Equity = $260,400 - $190,760 = $69,640. D Total Expenses = $35,840 - $9,840 = $26,000; Total Assets = $190,430 + $97,525 = $287,955. E Net Income = $224,130 - $209,500= $14,630; Total Assets = $173,650 + $360,100 = $533,750. Financial Accounting, 11/e 2-13 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. E1–11. PAINTER CORPORATION Income Statement For the Month of January, Current Year Total revenues $305,000 Less: Total expenses (excluding income tax) 189,000 Pretax income 116,000 Less: Income tax expense 25,000 Net income $ 91,000 PAINTER CORPORATION Balance Sheet At January 31, Current Year Assets Cash $ 65,150 Receivables from customers 44,700 Merchandise inventory 94,500 Total assets $204,350 Liabilities Payables to suppliers $ 25,950 Income taxes payable 25,000 Total liabilities 50,950 Stockholders' Equity Common stock 62,400 Retained earnings (from income statement above) 91,000 Total stockholders’ equity 153,400 Total liabilities and stockholders' equity $204,350 EMAIL ME: EMAIL ME: 2-14 Solutions Manual © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. E1–12. ANALYTICS CORPORATION Income Statement For the Year Ended December 31, Current Year Total revenues $299,000 Less: Total expenses (excluding income tax) 184,000 Pretax income 115,000 Less: Income tax expense 34,500 Net income $ 80,500 ANALYTICS CORPORATION Balance Sheet At December 31, Current Year Assets Cash $ 70,150 Receivables from customers 34,500 Merchandise inventory 96,600 Total assets $201,250 Liabilities Payables to suppliers $ 26,450 Income taxes payable 34,500 Total liabilities 60,950 Stockholders' Equity Common stock 59,800 Retained earnings (from income statement above) 80,500 Total stockholders’ equity 140,300 Total liabilities and stockholders' equity $201,250 Financial Accounting, 11/e 2-15 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. E1–13. PLUMMER STONEWORK CORPORATION Statement of Stockholders’ Equity For the Year Ended December 31, 2023 Common Stock Retained Earnings Balance December 31, 2022* $100,000 $16,800 Net income 42,000 Dividends $100,000 (18,700) Balance December 31, 2023 $100,000 $40,100 * Beginning retained earnings + Net income – Dividends = Ending retained earnings For 2022: $0 + $31,000 – $14,200 = $16,800; Ending retained earnings for 2022 becomes beginning retained earnings for 2023. E1-14 BENNETT INC. Income Statement For the Year Ended December 31, Current Year Revenues $1,401 Expenses 1,301 Net income $ 100 BENNETT INC. Statement of Stockholders’ Equity For the Year Ended December 31, Current Year Common Stock Retained Earnings Beginning $120 $193 +Net income - 100 -Dividends - (20) Ending $120 $273 E1–15. (I) (1) Purchases of property, plant, and equipment O (2) Cash received from customers (F) (3) Cash paid for dividends to stockholders (O) (4) Cash paid to suppliers (O) (5) Income taxes paid (O) (6) Cash paid to employees I (7) Cash proceeds received from sale of investment in another company (F) (8) Repayment of borrowings 2-16 Solutions Manual © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. PROBLEMS (Note to the instructor: Most students find the Problems in this chapter to be quite challenging.) P1–1. Req. 1 HIGHLIGHT CONSTRUCTION COMPANY Income Statement For the Year Ended December 31, Current Year Total sales revenue (given) $128,400 Total expenses (given) 80,200 Pretax income 48,200 Income tax expense ($48,200 x 30%) 14,460 Net income $ 33,740 Req. 2 HIGHLIGHT CONSTRUCTION COMPANY Statement of Stockholders’ Equity For the Year Ended December 31, Current Year Common Stock Retained Earnings Balance January 1, Current year $ 0 $ 0 Stock issuance (given) 87,000 +Net income (from req. 1) 33,740 –Dividends (given) $ 87,000 (10,000) Balance December 31, Current year $ 87,000 $ 23,740 Req. 3 HIGHLIGHT CONSTRUCTION COMPANY Balance Sheet At December 31, Current Year Assets Cash (given) $ 25,600 Receivables from customers (given) 10,800 Inventory of merchandise (given) 81,000 Equipment (given) 42,000 Total assets $159,400 Liabilities Accounts payable (given) $46,140 Salary payable (given) 2,520 Total liabilities $ 48,660 Stockholders' Equity Common stock (given) $87,000 Retained earnings (from req. 2) 23,740 Total stockholders' equity 110,740 Financial Accounting, 11/e 2-17 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. Total liabilities and stockholders' equity $159,400 EMAIL ME: 2-18 Solutions Manual © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. P1–2. Req. 1 JAMES COOK LAWN SERVICE Income Statement For the Three Months Ended August 31 Revenues from Services Lawn service–cash $15,000 –credit 700 Total revenues $15,700 Expenses Gas, oil, and lubrication ($1,050+$180) 1,230 Pickup repairs 250 Mower repair 110 Miscellaneous supplies used 80 Helpers (wages) 5,400 Payroll taxes 190 Preparation of payroll tax forms 25 Insurance 125 Telephone 110 Interest expense on note paid 78 Equipment use cost (depreciation) 600 Total expenses 8,198 Net Income $ 7,502 Req. 2 Because the above report reflects only revenues, expenses, and net income, it is reasonable to suppose that James would need the following: (1) A balance sheet–that is, a statement that reports for the business, at the end of August, each asset (name and amount, such as Cash, $XX), each liability (such as Wages Payable, $XX), and stockholders’ equity. (2) A statement of stockholders’ equity that shows how income and dividends (if any) affect retained earnings on the balance sheet. Financial Accounting, 11/e 2-19 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. P1–3. Req. 1 Req. 2–Explanation Transaction Income Cash (a) +$66,000 +$55,000 All services performed increase income; cash received during the period: $66,000 – $11,000 = $55,000. (b) –0– +56,000 Cash borrowed is not income. (c) –0– –12,500 Purchase of the truck does not represent an expense until the truck is used (it is an asset); cash outflow was $12,500. (d) –25,000 –12,500 All of the wages incurred reduce income, $25,000; cash paid during the quarter: $25,000 x 1/2 = $12,500. The $12,500 owed will be paid on the next payroll date. (e) –2,900 –3,800 Not all of the supplies were used; expense is the amount used: $3,800 – $900 = $2,900. Cash paid during the quarter was $3,800. (f) –38,000 –31,500 All expenses incurred reduce income; cash expended: $38,000 – $-6,500 = $31,500. (g) Based only on the above: Income (loss) $ 100 Cash inflow (outflow) $ 50,700 2-20 Solutions Manual © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC. ALTERNATE PROBLEMS AP1–1. Req. 1 INFLUENCE CORPORATION Income Statement For the Year Ended December 31, Current Year Total sales revenue (given) $100,000 Total expenses (given) 68,500 Pretax income 31,500 Income tax expense ($31,500 x 30%) 9,450 Net income $ 22,050 Req. 2 INFLUENCE CORPORATION Statement of Stockholders’ Equity For the Year Ended December 31, Current Year Common Stock Retained Earnings Balance, January 1, Current year $ 0 $ 0 Common stock issuance (given) 62,000 +Net income (from req. 1) 22,050 –Dividends (given) $ 62,000 0 Balance, December 31, Current year $ 62,000 $ 22,050 Req. 3 INFLUENCE CORPORATION Balance Sheet At December 31, Current Year Assets Cash (given) $ 13,150 Receivables from customers (given) 10,900 Inventory of merchandise (given) 27,000 Equipment (given) 66,000 Total assets $117,050 Liabilities Accounts payable (given) $31,500 Salary payable (given) 1,500 Total liabilities $ 33,000 Stockholders' Equity Common stock (given) 62,000 Retained earnings (from req. 2) 22,050 Total stockholders' equity 84,050 Total liabilities and stockholders' equity $117,050