Question

Majka Company was started on January 1, Year 1. During Year 1, the company experienced the following three accounting events: (1) earned cash revenues of $28,600, (2) paid cash expenses of $13,200, and (3) paid a $1,500 cash dividend to its stockholders. These were the only events that affected the company during Year 1.RequiredRecord the effects of each accounting event under the appropriate general ledger account headings.Prepare an income statement, statement of changes in stockholders’ equity, and a balance sheet dated December 31, Year 1, for Mijka Company.

Answer 1

The firm's accounting profit is $50,000.

Step-by-step explanation:

To calculate the firm's accounting profit, we need to subtract the explicit costs from the total revenues. In this case, the total revenues are $1 million, while the explicit costs include labor ($600,000), capital ($150,000), and materials ($200,000). So, the accounting profit is $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.

Answer 2

See the explanation below

Step-by-step explanation:

a. Record the effects of each accounting event under the appropriate general ledger account headings.

Using the accounting equation, we have:

Asset = Shareholder's equity + Liabilities

Cash = Retained earning + Common stock

Cash = $28,600 - $13,200 - $1,500 = $13,900 = Assets

Retained earning = $28,600 - $13,200 - $1,500 = $13,900

Common stock = 0

Retained earning + Common stock = $13,900 + 0 = Shareholder's equity

Liabilities = 0

Therefore, we have:

Majka Company

Accounting Equation for Year 1

Asset ($) = Shareholder's equity + Liabilities

13,900 = 13,900 + 0

b. Prepare an income statement

Details Amount ($)

Revenue 28,600

Expenses (13,200)

Net Profit 15,400

Dividend (1,500)

Retained earning 13,900

C. Statement of changes in stockholders’ equity

Details Amount ($)

Common stock 0

Beginning retained earning 0

Retained earning for the year 13,900

Stockholders’ equity 13,900

d. Mijka Company, Balance sheet as at December 31, Year 1,

Details Amount ($)

Assets:

Cash 13,900

Liabilities:

Current and Long terms 0

Net total assets 13,900

Stockholders’ equity:

Common stock 0

Retained earning 13,900

Stockholders’ equity 13,900