Love Company’s accounting records show an after-closing balance of $20,000 in its Retained Earnings account on December 31, 2016. During the 2016 accounting cycle, Love earned $16,300 of revenue, incurred $9,800 of expense, and paid $2,100 of dividends. Revenues and expenses were recognized evenly throughout the accounting period.

Required
a.	Determine the balance in the Retained Earnings account as of January 1, 2017.

b. Determine the balance in the temporary accounts as of January 1, 2016.




c. Determine the after-closing balance in the Retained Earnings account as of December 31, 2015.



d. Determine the balance in the Retained Earnings account as of June 30, 2016.

Explanation:

a.

Retained Earnings is a permanent account, meaning that one period's ending balance becomes the next period's beginning balance.  Since the December 31, 2016 balance is $20,000, this was also the balance on January 1, 2017.

b.

The balance in the temporary accounts will be zero on January 1, 2016.  The temporary accounts would have been closed to Retained Earnings on December 31, 2015, thus leaving a zero balance.

  
c.

The December 31, 2015 balance in the Retained Earnings account is the same balance as the January 1, 2016 balance, computed as follows:

  

Beginning retained earnings balance (January 1, 2016)		?
+ Net income (Revenue $16,300 – Expenses $9,800)		6,500
– Dividends		(2,100	)
Ending retained earnings balance (December 31, 2016)		20,000

  

End. Retained Earnings + Dividends – Net Income = Beg. Retained

Earnings; and January 1, 2016 = December 31, 2015

= $20,000 + $2,100– $6,500  = $15,600 = January 1, 2016 Retained Earnings

Therefore: December 31, 2015 Retained Earnings = $15,600.

d.

The revenue and expense data are recorded in Revenue and Expense accounts and do not affect retained earnings at the time of recognition.  The balance in the Retained Earnings account on June 30, 2016 is the same as it was on January 1, 2016 which is $15,600.

The accountant for Huckleberry Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available

The accountant for Huckleberry Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:
 

Retained earnings balance at the beginning of the year	$160,000
Cash dividends declared for the year	$49,600
Net income for the year	$96,500

What is the ending balance for retained earnings?

$277,500.

$13,900.

$256,500.

$206,900.

$110,400.

Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities was $32,500; net cash used in investing activities was $11,800 and net cash used in financing activities was $14,700. If the beginning cash balance is $5,900, what is the ending cash balance?
$64,900.
$53,100.
$35,500.
$6,000.
$11,900.

Use the following information to calculate cash received from dividends:

   

Dividends revenue	$ 39,800
Dividends receivable, January 1	4,600
Dividends receivable, December 31	7,400

$44,400.

$37,000.

$32,400.

$39,800.

$42,600.

A company reported that its bonds with a par value of $50,000 and a carrying value of $60,000 are retired for $63,600 cash, resulting in a loss of $3,600. The amount to be reported under cash flows from financing activities is:

$(10,000).

$10,000.

$(63,600).

$(60,000).

$(3,600).

A machine with a cost of $160,000, accumulated depreciation of $100,000, and current year depreciation expense of $24,500 is sold for $52,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:
$48,000.
$8,000.
$24,500.
$23,500.
$52,000.

A machine with a cost of $147,000 and accumulated depreciation of $102,000 is sold for $58,500 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

$45,000.

$58,500.

$13,500.

Zero. This is a financing activity.

Zero. This is an operating activity.

Top of Form

In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available:

 

Net income for the year was	$57,000
Accounts payable increased by	$18,500
Accounts receivable decreased by	$25,500
Inventories increased by	$6,000
Depreciation expense was	$31,500

Net cash provided by operating activities was:

$126,500.

$63,500.

$75,500.

$87,500.

$138,500.

Use the following information and the indirect method to calculate the net cash provided or used by operating activities:

 

Net income	$ 86,200
Depreciation expense	12,900
Gain on sale of land	7,400
Increase in merchandise inventory	2,950
Increase in accounts payable	7,050

$30,200.

$37,600.

$14,350.

$15,350.

$95,800.

A company's income statement showed the following: net income, $127,000 and depreciation expense, $30,900. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,700; merchandise inventory increased $18,600; and accounts payable increased $3,700. Calculate the net cash provided or used by operating activities.
$121,000.
$163,100.
$125,900.
$152,700.
$182,500.

Bottom of Form

Mark’s Consulting experienced the following transactions for 2016, its first year of operations, and 2017.

Mark’s Consulting experienced the following transactions for 2016, its first year of operations, and 2017. Assume that all transactions involve the receipt or payment of cash.

Transactions for 2016

1.	Acquired $55,000 by issuing common stock.
2.	Received $105,000 for providing services to customers.
3.	Borrowed $16,000 cash from creditors.
4.	Paid expenses amounting to $59,000.
5.	Purchased land for $35,000 cash.

Transactions for 2017

Beginning account balances for 2017 are:

Cash	$	82,000
Land		35,000
Notes payable		16,000
Common stock		55,000
Retained earnings		46,000

1.	Acquired an additional $21,000 from the issue of common stock.
2.	Received $131,000 for providing services in 2017.
3.	Paid $11,000 to reduce notes payable.
4.	Paid expenses amounting to $74,000.
5.	Paid a $14,500 dividend to the stockholders.
6.	Determined that the market value of the land is $45,000.

Required

a.

Record the effects of each accounting event under the appropriate headings for each year. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide appropriate titles for these accounts in the last column of the table.   b-1. Prepare an income statement for each year accounting period. b-2. Prepare a statement of changes in stockholders’ equity for each year accounting period.   b-3. Prepare a year-end balance sheet for each year accounting period.   b-4. Prepare a statement of cash flows for each year accounting period.   c. Determine the amount of cash that is in the retained earnings account at the end of 2016 and 2017.   e. Determine the balance in the Retained Earnings account immediately after Event 2 in 2016 and in 2017 are recorded. Explanation: e. Immediately after Event 2 in 2016 is recorded the balance in the retained earnings account is zero. The revenue is recorded in a revenue account, not in the retained earnings account. The revenue, expense, and dividend accounts are closed to the retained earnings account at the end of each accounting period. After closing the accounts at the end of 2016 the retained earnings account will have a balance of $46,000 ($105,000 revenue – $59,000 expenses). The 2016 ending balance in retained earnings becomes next year’s beginning balance. Thus, the balance in the retained earnings account on January 1, 2017 is $46,000. This balance will not change until the closing process is completed in December 2017. As a result, the balance in the retained earnings account immediately after Event 2 in 2017 is $46,000.