E 1-2B (similar to E1-6) [LO 1] Analyzing Revenues and Expenses and Preparing an Income

Statement
Assume that you are the owner of University Market, which specializes in items that interest
students.
At the end of March 2011, you find (for March only) this information:
a. Sales, per the cash register tapes, of $150,000, plus one sale on credit (a special situation)
of $5,000.
b. With the help of a friend (who majored in accounting), you determine that all of the
goods sold during March cost $60,000 to purchase.
c. During the month, according to the checkbook, you paid $32,000 for salaries, rent,
supplies, advertising, and other expenses; however, you have not yet paid the $1,100
monthly utilities for March on the store and fixtures.
Required:
On the basis of the data given (disregard income taxes), what was the amount of net income for
March? Show computations. ( Hint: A convenient form to use has the following major side
captions: Revenue from Sales, Expenses, and the difference—Net Income.)

ANSWER:

Income Statement
for the period ended 31/03/2011

Revenues:
Cash Sales $ 150,000
Credit Sales $ 5,000
Total Revenues $ 155,000

Expenses:
COGS $ 60,000
Other Expenses $ 32,000
Utilities $ 1,100
Total Expenses $ 93,100

NET INCOME $ 61,900

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E1-6B (similar to E1-12) [LO 1] Preparing a Statement of Retained Earnings Barbara’s Design
Corporation was organized on January 1, 2011. For its first two years of operations, it reported the
following:

Net income for 2011 $ 39,000

Net income for 2012 40,000

Dividends for 2011 15,200

Dividends for 2012 19,700

Total assets at the end of 2011 150,000

Total assets at the end of 2012 320,000

Required:
On the basis of the data given, prepare a statement of retained earnings for 2012. Show computations.

ANSWER:

Barbara’s Design Corporation

Statement of Retained Earning
From the period ended 31/12/2011
Net Income 2011 $ 39,000
Dividends for 2011 $ (15,200)
Retained Earnings, 31/12/2011 $ 23,800

Barbara’s Design Corporation

Statement of Retained Earning
from the period ended 31/12/2012
Retained Earnings, 31/12/2011 $ 23,800
Net Income 2012 $ 40,000
Dividends for 2012 $ (19,700)
Retained Earnings, 31/12/2012 $ 44,100

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E 1-7B (similar to E1-6) [LO 1] Analyzing Revenues and Expenses and Preparing an Income
Statement
Assume that you are the owner of Fabulous Styles, which specializes in clothing for teens.
At the end of March 2011, you find (for March only) this information:
a. Sales, per the cash register tapes, of $180,000, plus one sale on credit (a special situation)
of $4,000.
b. With the help of a friend (who majored in accounting), you determine that all of the
goods sold during March cost $90,000 to purchase.
c. During the month, according to the checkbook, you paid $22,000 for salaries, rent,
supplies, advertising, and other expenses; however, you have not yet paid the $1,000
monthly utilities for March on the store and fixtures.
Required:
On the basis of the data given (disregard income taxes), what was the amount of net income for
March? Show computations. (Hint: A convenient form to use has the following major side captions:
Revenue from Sales, Expenses, and the difference—Net Income.)

ANSWER:

Income Statement
for the period ended 31/03/2011

Revenues:
Cash Sales $ 180,000
Credit Sales $ 4,000
Total Revenues $ 184,000

Expenses:
COGS $ 90,000
Other Expenses $ 22,000
Utilities $ 1,000
Total Expenses $ 113,000

NET INCOME $ 71,000

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E1-9B (similar to E1-10) [LO1] Inferring Values Using the Income Statement and Balance Sheet
Equations Review the chapter explanations of the income statement and the balance sheet
equations. Apply these equations in each independent case to compute the two missing amounts for
each case. Assume that it is the end of 2012, the first full year of operations for the company. (Hint:
Organize the listed items as they are presented in the balance sheet and income statement equations
and then compute the missing amounts.)

Independen Total Total Net Income Total Total Stockholders’

t Revenues Expenses (Loss) Assets Liabilities Equity
Cases

A $240,820 $176,700 $ $295,000 $95,000 $

B 165,700 32,020 585,000 365,400
C 67,990 89,890 288,200 195,760
D 43,590 15,840 218,675 99,525
E 225,130 210,600 195,800 316,200

ANSWER:
Independent Case (A)

Income Statement
For the period ended 31/03/2012

Total Revenues $ 240,820

Total Expenses $ 176,700

NET INCOME $ 64,120

Balance Sheet
at 31/12/2012

Total Assets $295,000

Total Liabilities’ $95,000

Stockholder Equity $200,000

Total liabilities and stockholders' equity $295,000

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Independent Case (B)

Income Statement
For the period ended 31/03/2012

Total Revenues $ 197,720

Total Expenses $ 165,700

NET INCOME $ 32,020

Balance Sheet
at 31/12/2012

Total Assets $585,000

Total Liabilities’ $219,600

Stockholder Equity $365,400

Total liabilities and stockholders' equity $585,000

Independent Case (C)

Income Statement
For the period ended 31/03/2012

Total Revenues $ 67,990

Total Expenses $ 89,890

NET INCOME $ (21,900)

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 Balance Sheet
at 31/12/2012

Total Assets $288,200

Total Liabilities’ $195,760

Stockholder Equity $92,440

Total liabilities and stockholders' equity $288,200

Independent Case (D)

Income Statement
For the period ended 31/03/2012

Total Revenues $ 43,590

Total Expenses $ 27,750

NET INCOME $ 15,840

Balance Sheet
at 31/12/2012

Total Assets $318,200

Total Liabilities’ $218,675

Stockholder Equity $99,525

Total liabilities and stockholders' equity $318,200

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Independent Case (E)

Income Statement
For the period ended 31/03/2012

Total Revenues $ 225,130

Total Expenses $ 210,600

NET INCOME $ 14,530

Balance Sheet
at 31/12/2012

Total Assets $512,000

Total Liabilities’ $195,800

Stockholder Equity $316,200

Total liabilities and stockholders' equity $512,000

Thank you!
Magdy Saber Elsayed Ibrahim

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