PR 1-6B Missing amounts from financial statements

The financial statements at the end of Atlas Realty’s first month of operations follow:

Atlas Realty Income Statement For the Month Ended May 31, 2016 Fees earned. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400,000 Expenses: Wages expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $   (a) Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000 Supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,600 Utilities expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,400 Miscellaneous expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      4,800 Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,000 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $        (b) Atlas Realty Retained Earnings Statement For the Month Ended May 31, 2016 Retained earnings, May 1, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $       (c) Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $      (d) Less dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (e) Increase in retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (f ) Retained earnings, May 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $     (g) Atlas Realty Balance Sheet May 31, 2016 AssetsLiabilities Cash . . . . . . . . . . . . . . . . . . . . . . . $123,200 Accounts payable . . . . . . . . . . . . . . . $48,000 Supplies . . . . . . . . . . . . . . . . . . . . 12,800 Stockholders’ Equity Land . . . . . . . . . . . . . . . . . . . . . . .         (h) Common stock . . . . . . . . . . . . . . . . . . $         (J) Retained earnings . . . . . . . . . . . . . . .           (k) Total stockholders' equity . . . . . . . .           (I) Total assets . . . . . . . . . . . . . . . . . $        (i) Total liabilities and stockholders’ equity . . . . . . . . . . . $      (m) Atlas Realty 

Statement of Cash Flows For the Month Ended May 31, 2016 Cash flows from operating activities: Cash received from customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $         (n) Deduct cash payments for expenses and payments to creditors. . . .    (252,800) Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . $     (o) Cash flows from investing activities: Cash payments for acquisition of land . . . . . . . . . . . . . . . . . . . . . . . . . . .(120,000) Cash flows from financing activities: Cash received from issuing common stock . . . . . . . . . . . . . . . . . . . . . . . $ 160,000 Deduct cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (64,000) Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . .(p) Net increase (decrease) in cash and May 31, 2016, cash balance. . . . . . . $              (q)

Instructions

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

Answer:

a. Wages expense, $203,200 ($288,000 – $48,000 – $17,600 – $14,400 – $4,800) 

b. Net income, $112,000 ($400,000 – $288,000) 

c. Retained Earnings, May 1, 2016, $0; Atlas Realty was organized on May 1, 2016. 

d. Net income for May, $112,000; from (b) 

e. Dividends, $64,000; from statement of cash flows. 

f. Increase in retained earnings, $48,000 ($112,000 – $64,000) 

g. Retained earnings, May 31, 2016, $48,000 (same as f) 

h. Land, $120,000; from statement of cash flows. 

i. Total assets, $256,000 ($123,200 + $12,800 + $120,000) 

j. Common stock, $160,000; from statement of cash flows. 

k. Retained earnings, $48,000; from retained earnings statement. 

l. Total stockholders' equity, $208,000 ($160,000 + $48,000) 

m. Total liabilities and stockholders’ equity, $256,000 ($48,000 + $208,000) 

n. Cash received from customers, $400,000; this is the same as fees earned since there are no accounts receivable. 

o. Net cash flows from operating activities, $147,200 ($400,000 – $252,800) 

p. Net cash flows from financing activities, $96,000 ($160,000 – $64,000) 

q. Net cash flows and May 31, 2016, cash balance, $123,200 ($147,200 – $120,000 + $96,000); also, the cash balance on the balance sheet.