Chapter 1
The financial statement that shows a company's financial position at a certain point in time.
Balance Sheet
Borrow $10,000 from a bank via a note payable
Purchase land for $5000 cash
Cash 10,000
Note Payable 10,000
Land 5,000
Cash 5,000
Sold merchandise to fans for $500 cash
Cash 500
Revenue 500
On September 1st, Hawkeye Co. received $1,200 cash for a one-year magazine subscription. They recorded the initial amount as unearned revenue. Record the adjusting journal entry as of December 31.
Unearned Rev. 12,000
Revenue 12,000
Left and Right
Credit means right
Financial statement that shows resources earned from the delivery of goods and services, resources used to earn the period's revenue, and an element that ends up in retained earnings.
Income Statement
Purchased computer and office equipment for $31,000, paying $4,000 in cash and signing a note payable to the manufacturer for the rest
Equipment 31,000
Cash 4,000
Note Payable 27,000
Hawkeye Co. bought insurance for next year for $3,500
Prepaid Insurance 3,500
Cash 35,00
On November 1st, Hawkeye Co. paid $6,000 for three months' rent in advance and initially recorded it as Prepaid Rent. Record the December 31 adjusting entry
Rent Expense 4000
Prepaid Rent 4000
Adjusting Entries
Financial Statement that reports the changes in the company's retained earnings and contributed capital accounts.
Statement of Stockholders' Equity
Issue 2,000 shares of $0.001 par value common stock for $5,000 cash.
Cash 5,000
Common Stock 2
Additional Paid-in Capital 4,998
Employees did a total of $5000 worth of work for Hawkeye Co. They have NOT been paid yet
Wages Expense 5000
Wages Payable 5000
In April, Hawkeye Co. had $5,550 in supplies; during the period, they purchased an additional $2,000 in supplies. A year-end count showed only $1,250 worth of supplies. Record the adjusting entry for Dec. 31
Supplies Expense 6,300
Supplies 6,300
Expenses are recorded when incurred. Usually, it is incurred to generate revenue.
Expense Recognition Principle
Herky Co. had a balance of $7,350,100 in beginning retained earnings, net income of $432,000 and ending retained earnings of $7,520,230. How much in dividends did Herky Co. pay out to its shareholders?
$261,870
Cash 25,000
Common Stock 100,
Additional Paid-in Capital 24,900
Hawkeye Co. declared a dividend of $50,000 to shareholders but has not paid the dividend yet
Retained Earnings 50,000
Dividend Payable 50,000
Hawkeye Inc. has a 12/31 year end. On Oct 1, 20X1, they invest $10,000 for 6 months in a CD that pays 6% interest anually. Hawkeye Co. will not receive the interest until the CD matures on Mar 31, 20X2. Prepare the adjusting entry.
Interest Receivable 150
Interest Revenue 150
Revenues are recognized when the company transfers promised goods and services to customers in the amount it expects to be entitled to receive
Revenue Recognition Principle
During the period, Kinnick Co. had $5,250,000 in revenues and $2,000,000 in expenses. Beginning retained earnings were $15,485,000 and they paid a dividend of $1,100,000. The balance of common stock at year's end was $6,231,130. If Kinnick Co. has $25,653,221 in liabilities, how much do they have in assets?
$49,519,351
Hawkeye Co. repurchased its common stock for $3,147 in cash.
Treasury Stock 3,147
Cash 3,147
Last year, Hawkeye Co. received a total of $420,000 in cash from fans for next year's football tickets. There are 12 games in total, and game 1 has just happened. Record the entry.
Unearned Revenue 35,000
Revenue 35,000
Hawkeye Co. purchased a building on January 1st, 20X1, for $600,000. Since it is PP&E, they must depreciate it. It has an estimated useful life of 40 years. Record the adjusting entry on December 31, 20X1
Depreciation Exp. 1,500
Accumulated Depr. 1,500
How are the Income Statement, Statement of Stockholders' Equity, Balance Sheet, and Statement of Cash Flows connected?
Net income from the income statement increases ending retained earnings on the statement of stockholders' equity. Ending retained earnings is one of the two components of Stockholders' equity on the Balance Sheet. Statement of Cash Flows shows how the cash balance on the balance sheet has changed over the period.