started the accounting period with $30000 in cash assets, $18000 of liabilities and 4000 - common stock. During the yer earned $48000, paid cash expenses of $32,000, paid a cash dividend to stockholders - $2000. Aquired $10,000 addition cash from sale of stock and paid $6000 cash to reduce liability. Show this on the T and in an income statement and statement of cash flows.
To show the given transactions on the T-account, income statement, and statement of cash flows, we will break them down step by step:
1. T-accounts:
- Cash account:
- Opening balance: $30,000
- Earned during the year: +$48,000
- Additional cash from the sale of stock: +$10,000
- Cash paid for expenses: -$32,000
- Cash paid to reduce liability: -$6,000
- Cash dividend paid: -$2,000
- Closing balance: ?
- Liability account:
- Opening balance: $18,000
- Cash paid to reduce liability: -$6,000
- Closing balance: ?
- Common Stock account:
- Opening balance: $4,000
- No changes during the year
- Closing balance: ?
We can calculate the closing balances in the T-accounts by adding or subtracting the transaction amounts from the opening balances.
- Cash account closing balance:
Opening Balance + Earned - Expenses - Dividends + Additional Cash - Cash for Liability = $30,000 + $48,000 - $32,000 - $2,000 + $10,000 - $6,000 = $48,000
- Liability account closing balance:
Opening Balance - Cash for Liability = $18,000 - $6,000 = $12,000
- Common Stock account closing balance:
No changes during the year, so it remains at $4,000
The T-account closing balances are:
- Cash: $48,000
- Liability: $12,000
- Common Stock: $4,000
2. Income Statement:
The income statement shows the revenues, expenses, and net income of the accounting period.
- Revenues: $48,000 (the amount earned during the year)
- Expenses: $32,000 (the cash paid for expenses)
- Net Income: Revenues - Expenses = $48,000 - $32,000 = $16,000
The income statement for the accounting period shows:
- Revenues: $48,000
- Expenses: $32,000
- Net Income: $16,000
3. Statement of Cash Flows:
The statement of cash flows shows the cash inflows and outflows during the accounting period. We categorize the transactions into operating, investing, and financing activities.
- Cash inflows:
- Cash received from revenue: $48,000
- Additional cash from the sale of stock: $10,000
- Cash outflows:
- Cash paid for expenses: $32,000
- Cash dividend paid: $2,000
- Cash paid to reduce liability: $6,000
The statement of cash flows shows:
- Operating activities:
- Cash received from revenue: $48,000
- Cash paid for expenses: $32,000
- Investing activities:
- Additional cash from the sale of stock: $10,000
- Financing activities:
- Cash dividend paid: $2,000
- Cash paid to reduce liability: $6,000
This breakdown should illustrate how to show the given transactions on the T-account, income statement, and statement of cash flows.