Wolverine Realty
Income Statement
For the Month Ended April 30, 2014
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
Statement of Owner’s Equity
For the Month Ended April 30, 2014
Dakota Rowe, capital, April 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (c)
Investment on April 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $375,000
Net income for April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (d)
$ (e)
Less withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000
Increase in owner’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (f)
Dakota Rowe, capital, April 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (g)
Wolverine Realty
Balance Sheet
April 30, 2014
Assets Liabilities
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . $462,500 Accounts payable . . . . . . . . . . . . . . . . $100,000
Supplies . . . . . . . . . . . . . . . . . . . . . . . 12,500 Owner’s Equity
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 Dakota Rowe, capital . . . . . . . . . . . . . (i)
Total assets . . . . . . . . . . . . . . . . . . . . . $ (h) Total liabilities and owner’s equity $ (j)
Wolverine Realty
Statement of Cash Flows
For the Month Ended April 30, 2014
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 from investing activities:
Cash payments for acquisition of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (m)
Cash flows from financing activities:
Cash received as owner’s investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (n)
Deduct cash withdrawal by owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (o)
Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . (p)
Net increase (decrease) in cash and April 30, 2014, 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. Dakota Rowe, capital, April 1, 2014, $0; Wolverine Realty was organized on April 1, 2014.
d. Net income for April, $275,000 from income statement
e. $650,000 ($375,000 + $275,000)
f. Increase in owner’s equity, $525,000 ($650,000 – $125,000)
g. Dakota Rowe, capital, April 30, 2014, $525,000
h. Total assets, $625,000 ($462,500 + $12,500 + $150,000)
i. Dakota Rowe, capital, $525,000 ($625,000 – $100,000); same as (g)
j. Total liabilities and owner’s 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 as owner’s investment, $375,000
o. Cash withdrawal by owner, ($125,000)
p. Net cash flows from financing activities, $250,000 ($375,000 – $125,000)
q. Net cash flow and April 30, 2014, cash balance, $462,500 ($362,500 – $150,000 + $250,000); also the cash balance on the balance sheet.