/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q22E Mountain Drycleaners started 201... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 1: Q22E (page 38)

Mountain Drycleaners started 2018 with total assets of \(19,000 and total liabilities of \)14,000. At the end of 2018, Mountain鈥檚 total assets stood at \(12,000 and total liabilities were \)9,000. Requirements 1. Did the stockholders鈥� equity of Mountain Drycleaners increase or decrease during 2018? By how much? 2. Identify the four possible reasons that stockholders鈥� equity can change

Short Answer

Expert verified

(1) Stockholders鈥� Equity decreases by $2,000.

(2) Dividends, revenues, expenses and common stock.

Step by step solution

01

Step-by-Step-SolutionStep 1: Calculation of Total Stockholders’ Equity

Total stockholders鈥� equity of 2018 beginning and end is calculated as follows:

Stockholders'Equity鈥�at2018Beginning=Assets鈭�Liabilities=$19,000鈭�$14,000=$5,000

Stockholders'Equity鈥�at2018End=Assets鈭�Liabilities=$12,000鈭�$9,000=$3,000


02

Calculation of decrease in stockholders’ equity

Decrease in stockholders鈥� equity is calculated as follows:

DecreaseinStockholders'Equity=Stockholders'Equity鈥�at2018Beginning鈭�Stockholders'Equity鈥�at2018End=$5,000鈭�$3,000=$2,000

03

Reason for change in stockholders’ equity

Reasons for the change are as follows:

  • Dividends are paid out of retained earnings, hence it decreases retained earnings as it is a part of equity.
  • Expenses are costs incurred to avail services, which reduces equity.
  • Revenues are the income generated by way of selling of goods or services, and it affects the equity.
  • Issuance of common stock increase the contributed capital, which is a part of stockholders鈥� equity

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Indicate the effects of the following business transactions on the accounting equation of Vivian鈥檚 Online Video store. Transaction (a) is answered as a guide. a. Received cash of \(10,000 from issuance of common stock. Answer: Increase asset (Cash); Increase equity (Common Stock) b. Earned video rental revenue on account, \)2,800. c. Purchased office furniture on account, \(300. d. Received cash on account, \)400. e. Paid cash on account, \(100. f. Rented videos and received cash of \)200. g. Paid monthly office rent of \(1,000. h. Paid \)100 cash to purchase office supplies

Canyon Canoe Company is a service-based company that rents canoes for use on local lakes and rivers. Amber and Zack Wilson graduated from college about 10 years ago. They both worked for one of the 鈥淏ig Four鈥� accounting firms and became CPAs. Because they both love the outdoors, they decided to begin a new business that will combine their love of outdoor activities with their business knowledge. Amber and Zack decide that they will create a new corporation, Canyon Canoe Company, or CCC for short. The business began operations on November 1, 2018. Nov. 1 Received \(16,000 cash to begin the company and issued common stock to Amber and Zack. 2 Signed a lease for a building and paid \)1,200 for the first month鈥檚 rent. 3 Purchased canoes for \(4,800 on account. 4 Purchased office supplies on account, \)750. 7 Earned \(1,400 cash for rental of canoes. 13 Paid \)1,500 cash for wages. 15 Paid \(50 dividends to stockholders. 16 Received a bill for \)150 for utilities. (Use separate payable account.) 20 Received a bill for \(175 for cell phone expenses. (Use separate payable account.) 22 Rented canoes to Early Start Daycare on account, \)3,000. 26 Paid \(1,000 on account related to the November 3, 2018, purchase. 28 Received \)750 from Early Start Daycare for canoe rental on November 22, 2018. 30 Paid $100 dividends to stockholders. Requirements 3. Prepare the statement of retained earnings for the month ended November 30, 2018.

Canyon Canoe Company is a service-based company that rents canoes for use on local lakes and rivers. Amber and Zack Wilson graduated from college about 10 years ago. They both worked for one of the 鈥淏ig Four鈥� accounting firms and became CPAs. Because they both love the outdoors, they decided to begin a new business that will combine their love of outdoor activities with their business knowledge. Amber and Zack decide that they will create a new corporation, Canyon Canoe Company, or CCC for short. The business began operations on November 1, 2018. Nov. 1 Received \(16,000 cash to begin the company and issued common stock to Amber and Zack. 2 Signed a lease for a building and paid \)1,200 for the first month鈥檚 rent. 3 Purchased canoes for \(4,800 on account. 4 Purchased office supplies on account, \)750. 7 Earned \(1,400 cash for rental of canoes. 13 Paid \)1,500 cash for wages. 15 Paid \(50 dividends to stockholders. 16 Received a bill for \)150 for utilities. (Use separate payable account.) 20 Received a bill for \(175 for cell phone expenses. (Use separate payable account.) 22 Rented canoes to Early Start Daycare on account, \)3,000. 26 Paid \(1,000 on account related to the November 3, 2018, purchase. 28 Received \)750 from Early Start Daycare for canoe rental on November 22, 2018. 30 Paid $100 dividends to stockholders. Requirements 5. Calculate the return on assets for Canyon Canoe Company for November 2018

Amos Sharp recently opened his own accounting firm on October 1, which he operates as a corporation. The name of the new entity is Amos Sharp, CPA. Sharp experienced the following events during the organizing phase of the new business and its first month of operations in 2018. Oct. 5 Sharp deposited \(45,000 in a new business bank account titled Amos Sharp, CPA. The business issued common stock to Sharp. 6 Paid \)300 cash for letterhead stationery for new office. 7 Purchased office furniture for the office on account, \(6,500. 10 Consulted with tax client and received \)3,300 for services rendered. 11 Paid utilities, \(340. 12 Finished tax hearings on behalf of a client and submitted a bill for accounting services, \)16,000. 18 Paid office rent, \(1,800. 25 Received amount due from client that was billed on October 12. 27 Paid full amount of Accounts Payable created on October 7. 31 Cash dividends of \)3,800 were paid to stockholders. Requirements 1. Analyze the effects of the events on the accounting equation of Amos Sharp, CPA. Use a format similar to Exhibit 1-6. 2. Prepare the following financial statements: a. Income statement. b. Statement of retained earnings. c. Balance sheet.

Exeter is a building contractor on the Gulf Coast. After losing a number of big lawsuits, it was facing its first annual net loss as the end of the year approached. The owner, Hank Snow, was under intense pressure from the company鈥檚 creditors to report positive net income for the year. However, he knew that the controller, Alice Li, had arranged a short-term bank loan of $10,000 to cover a temporary shortfall of cash. He told Li to record the incoming cash as 鈥渃onstruction revenue鈥� instead of a loan. That would nudge the company鈥檚 income into positive territory for the year, and then, he said, the entry could be corrected in January when the loan was repaid. Requirements 1. How would this action affect the year-end income statement? How would it affect the year-end balance sheet? 2. If you were one of the company鈥檚 creditors, how would this fraudulent action affect you?

See all solutions

Recommended explanations on Business Studies Textbooks

Actuarial Science in Business

Read Explanation

International Business

Read Explanation

Organizational Behavior

Read Explanation

Business Operations

Read Explanation

Business Development

Read Explanation

Operational Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.