Chapter 1 Introduction to Accounting and Business

37

3. Cash paid for land.

4. Cash paid for dividends.

EX 1-24  Statement of cash flows OBJ. 5

A summary of cash flows for Ethos Consulting Group for the year ended May 31, 2014,
is shown below.
Cash receipts:
Cash received from customers $637,500
Cash received from issuing capital stock 62,500
Cash payments:
Cash paid for operating expenses 475,000
Cash paid for land 90,000
Cash paid for dividends 17,500

The cash balance as of June 1, 2013, was $58,000.

Prepare a statement of cash flows for Ethos Consulting Group for the year ended May
31, 2014.

EX 1-25  Financial statements OBJ. 5

Correct amount We-Sell Realty, organized August 1, 2014, is owned and operated by Omar Farah. How
of total assets is many errors can you find in the following statements for We-Sell Realty, prepared after
$51,500. its first month of operations?

We-Sell Realty
Income Statement
August 31, 2014
Sales commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $140,000
Expenses:
Office salaries expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $87,000
Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
Automobile expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500
Miscellaneous expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,200
Supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,150
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,850
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $  25,000

Omar Farah
Retained Earnings Statement
August 31, 2013
Retained earnings, August 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $                0
Less dividends during August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   10,000
$(10,000)
Additional issuance of capital stock on August 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . .    15,000
$     5,000
Net income for August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Retained earnings, August 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $        30,000

Balance Sheet
For the Month Ended August 31, 2014
Assets Liabilities
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,900 Accounts receivable . . . . . . . . . . . . . . . . . . . . . $38,600
Accounts payable . . . . . . . . . . . . . . . . .  22,350 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000
Stockholders’ Equity
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 30,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . $31,250 Total liabilities and stockholders’ equity . . $72,600