Question

Cordell Inc. experienced the following events in Year 1, its first year of operation:

Received $59,000 cash from the issue of common stock.
Performed services on account for $81,000.
Paid a $5,900 cash dividend to the stockholders.
Collected $65,000 of the accounts receivable.
Paid $59,000 cash for other operating expenses.
Performed services for $19,000 cash.
Recognized $2,900 of accrued utilities expense at the end of the year.

Required:
a. Identify the events that result in revenue or expense recognition and those which affect the statement of cash flows.
b. Based on your response to Requirement a, determine the amount of net income reported on the 2018 income statement.

Answer 1

Cordell Inc.

a. Events that result in revenue or expense recognition:

Performed services on account for $81,000.

Paid $59,000 cash for other operating expenses.

Performed services for $19,000 cash

Recognized $2,900 of accrued utilities expense at the end of the year.

b. Events that affect the Statement of Cash Flows:

Received $59,000 cash from the issue of common stock.

Paid a $5,900 cash dividend to the stockholders.

Collected $65,000 of the accounts receivable.

Paid $59,000 cash for other operating expenses.

Performed services for $19,000 cash

b. The amount of the net income reported on the 2018 income statement is:

= $38,100.

Step-by-step explanation:

a) Data and Analysis:

Cash $59,000 Common stock $59,000

Accounts Receivable $81,000 Service Revenue $81,000

Cash Dividend $5,900 Cash $5,900

Cash $65,000 Accounts receivable $65,000

Operating $59,000 Cash $59,000

Cash $19,000 Service Revenue $19,000

Utilities Expense $2,900 Utilities Payable $2,900

Revenue:

Accounts Receivable $81,000

Cash $19,000 $100,000

Expenses:

Operating $59,000

Utilities Expense $2,900 $61,900

Net income $38,100