Question

Milea Inc. experienced the following events in Year 1, its first year of operations:

1. Received $13,500 cash from the issue of common stock
2. Performed services on account for $45,000
3. Pald the utility expense of $1,150.
4. Collected $36,540 of the accounts receivable.
5. Recorded $8,100 of accrued salaries at the end of the year
6. Paid a $1,050 cash dividend to the stockholders.
Required
1. Prepare the income statement
2. Prepare the statement of changes in stockholders' equity
3. Prepare the balance sheet as of December 31.
4. Prepare the statement of cash flows for the Year 1 accounting period.

Answer 1

1. Net income = $35,750

2. Stockholders' equity = $48,200

3. Total assets = Total Equity and Liabilities = $56,300

4. Net cash generated = $47,840

Step-by-step explanation:

1. Prepare the income statement

Milea Inc.

Income Statement

For the Year ended 31 December Year 1

Details Amount ($)

Revenue:

Service income 45,000

Expenses:

Utility expense (1,150)

Accrued salaries (8,100)

Net income 35,750

Dividend paid (1,050)

Retained earnings 34,700

2. Prepare the statement of changes in stockholders' equity

Milea Inc.

Statement of changes in stockholders' equity

For the Year ended 31 December Year 1

Details Amount ($)

Common stock 13,500

Retained earnings 34,700

Stockholders' equity 48,200

3. Prepare the balance sheet as of December 31.

Milea Inc.

Balance Sheet

As of 31 December Year 1

Details $

Assets

Current Assets

Ending cash balance 47,840

Accounts receivable ($45,000 - $36,540) 8,460

Total assets 56,300

Equity and Liabilities

Stockholders' equity 48,200

Liabilities

Current liabilities

Accrued salaries 8,100

Total Equity and Liabilities 56,300

4. Prepare the statement of cash flows for the Year 1 accounting period.

Milea Inc.

Statement of Cash Flows

For the Year ended 31 December Year 1

Details $ $

Net income 35,750

Adjustment to reconcile net income:

(Increase) decrease in current assets:

Accounts receivable ($45,000 - $36,540) (8,460)

Increase (decrease) in current liabilities:

Accrued salaries 8,100

Net cash from operating activities 35,390

Cash flow from financing activities:

Common stock 13,500

Dividend paid (1,050)

Net cash from financing activities 12,450

Net cash generated 47,840

Beginning cash balance 0

Ending cash balance 47,840