PR 1-6A Missing amounts from financial statements

The financial statements at the end of Wolverine Realty’s first month of operations are as follows:

wolverine Realty Income Statement For the Month Ended April 30, 2016 Fees earned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $     (a) Expenses:Wages expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000 Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (b) Utilities expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Miscellaneous expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     25,000 Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475,000 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $275,000 wolverine Realty  

Retained Earnings Statement For the Month Ended April 30, 2016 Retained earnings, April 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $        (c) Net income for April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $          (d) Less dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  125,000 Increase in retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (e) Retained earnings, April 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $       (f ) wolverine Realty Balance Sheet April 30, 2016 AssetsLiabilities

Cash . . . . . . . . . . . . . . . . . . . . . . . . $462,500 Accounts payable . . . . . . . . . . . $100,000 Supplies . . . . . . . . . . . . . . . . . . . . . 12,500 Stockholders’ Equity Land . . . . . . . . . . . . . . . . . . . . . . . .     150,000 Common stock . . . . . . . . . . . . . . $375,000 Retained earnings . . . . . . . . . . .       (h) Total stockholders’ equity . . . .(i) Total assets . . . . . . . . . . . . . . . . . . $            (g) Total liabilities and  stockholders’ equity . . . . . . . $           ( j)wolverine Realty Statement of Cash Flows For the Month Ended April 30, 2016 Cash flows from operating activities: Cash received from customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $       (k) Deduct cash payments for expenses and payments to creditors. . . .   (387,500) Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . $      (l) Cash flows used for investing activities: Cash payments for acquisition of land . . . . . . . . . . . . . . . . . . . . . . . . . . .(m) Cash flows from financing activities: Cash received from issuing common stock . . . . . . . . . . . . . . . . . . . . . . . $            (n) Deduct cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                (o) Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .(p) Net increase (decrease) in cash and April 30, 2016, cash balance . . . . . . $      (q)

Instructions

By analyzing the interrelationships among the four financial statements, determine the proper amounts for (a) through (q).

Answer:

a. Fees earned, $750,000 ($275,000 + $475,000) 

b. Supplies expense, $30,000 ($475,000 – $300,000 – $100,000 – $20,000 – $25,000) 

c. Retained earnings, April 1, 2016, $0; Wolverine Realty was organized on April 1, 2016. 

d. Net income for April, $275,000 from income statement 

e. $150,000 ($275,000 – $125,000) 

f. Retained earnings, April 30, 2016, $150,000 

g. Total assets, $625,000 ($462,500 + $12,500 + $150,000) 

h. Retained earnings, $150,000; same as (f) 

i. Total stockholders’ equity, $525,000 ($375,000 + $150,000) 

j. Total liabilities and stockholders’ equity, $625,000 ($100,000 + $525,000) 

k. Cash received from customers, $750,000 ($387,500 + $362,500); this is the same as fees earned (a) since there are no accounts receivable. 

l. Net cash flows from operating activities, $362,500 ($750,000 – $387,500) 

m. Cash payments for acquisition of land, ($150,000) 

n. Cash received from issuing common stock, $375,000 

o. Cash dividends, ($125,000) 

p. Net cash flows from financing activities, $250,000 ($375,000 – $125,000) 

q. Net cash flow and April 30, 2016, cash balance, $462,500 ($362,500 – $150,000 + $250,000); also the cash balance on the balance sheet.