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Chapter 1: Q24E (page 38)

The records of Felix Company show the following at December 31, 2018:

Assets & Liabilities: Equity:

Beginning: Common Stock \( 11,000

Assets \) 67,000 Dividends 8,000

Liabilities 11,000 Revenues 205,000

Ending: Expenses ?

Assets $ 46,000 Retained Earnings, January 1, 2018 45,000

Liabilities 34,000

Requirements 1. Compute the missing amount for Felix Company. You will need to determine Retained Earnings, December 31, 2018, and total stockholders鈥� equity, December 31, 2018. 2. Did Felix earn a net income or suffer a net loss for the year? Compute the amount.

Short Answer

Expert verified

(1) Expenses equals $241,000.

(2) Felix earned loss in 2018 of $(236,000).

Step by step solution

01

Step-by-Step-SolutionStep 1: Calculation of total stockholders’ equity for 2018 end

Total Stockholders鈥� equity for 2018 End is calculated as follows:

TotalStockholders'Equity鈥�onDecember31,2018=Assets鈭�Liabilities=$46,000鈭�$34,000=$12,000

02

Calculation of retained earnings for 2018 end

Retained Earnings for 2018 is calculated as follows:

RetainedEarningsonDecember31,2018=TotalStockholders'Equity鈥�onDecember31,2018鈭�CommonStock=$12,000鈭�$11,000=$1,000

03

Calculation of expenses

(1) Expenses is calculated as follows:

Expenses=RetainedEarningsonJanuary1,2018鈭�RetainedEarningsonDecember31,2018+Revenues鈭�Dividends=$45,000鈭�$1,000+$205,000鈭�$8,000=$241,000

04

Calculation of net income (loss)

(2) Net income (loss) is calculated as follows:

NetIncome(Loss)=Revenues鈭�Expenses=$205,000鈭�$241,000=$(236,000)

Thus, expenses is $241,000 and net loss equals $(236,000).

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Most popular questions from this chapter

Match the accounting terminology to the definitions. 1. Certified management accountants a. information system that measures business activities, processes that information into reports, and communicates the results to decision makers 2. Accounting b. professional accountants who serve the general public 3. Managerial accounting c. person or business to whom a business owes money 4. Certified public accountants d. field of accounting that focuses on providing information for internal decision makers 5. Financial accounting e. professionals who work for a single company 6. Creditor f. field of accounting that focuses on providing information for external decision makers

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g. Paid rent for the month.

h. Purchased land; signed a note payable.

i. Paid employees wages for the week.

j. Incurred utility expense on account.
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