E11 Reporting Amounts on the Four Basic Financial Statements

E1-1 Reporting Amounts on the Four Basic Financial Statements [LO 1-2] Using the following table and the equations underlying each of the four basic financial statements, show (a) that the balance sheet is in balance, (b) that net income is properly calculated, (c) what caused changes in the retained earnings account, and (d) what caused changes in the cash account. (Cash outflows should be indicated with a minus sign.) Assets Liabilities Stockholders\' Equity Revenue Expenses Net Income Dividends $19,900 14,600 5,300 12,200 10,050 2,150 850 5,200 6,500 3,300 Beginning Retained Earnings Ending Retained Earnings Cash Flows from Operating Activities Cash Flows from Investing Activities (2,700) Cash Flows from Financing Activities (1,750) Beginning Cash Ending Cash 2,700 1,550 C.

Solution

a. Assets = liabilities + Stockholder\'s Equity 19,900 = 14,600 + 5,300 b. Net income = Revenues - Expenses 2,150 = 12,200 - 10,050 c. Ended Beginning + Net - Dividends retained = retained income earnings earnings 6,500 = 5,200 + 2,150 - 850 d. Ending = Beginning + cash flow + Cash flow + cash flow cash cash from from from operating investing financing activities activities activities 1,550 = 2,700 + 3,300 + -2700 + -1,750