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Chapter 1: Q24E_2 (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 $(36,000).

Step by step solution

01

Calculation of Total Stockholders’ Equity for 2018 End

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

Total Stockholders' Equity on Decemner 31, 2018 = Assets - Liabilities

= $46,000 - $34,000

= $12,000

02

Calculation of retained earnings for 2018 End

Retaained Earnings for 2018 is calculated as follows:

Retained Earnings on December 31, 2018 = Total stockholders' Equity on December 31,2018

- common stock

= $12,000 - $11,000

= $1,000

03

Calculation of Expenses

(1) Expenses is calculated as follows:

Expenses = Retained Earnings on January 1,2018

- Retained Earnings on December 31,2018 + Revenues - Dividends

= $45,000 - $1,000 + $205,000 - $8,000

= $241,000

04

Calculation of net income (loss)

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

Net Income (Loss) = Revenues - Expenses

= $205,000 - $241,000

= $(36,000)

Thus, expenses is $241,000 and net loss equals $(36,000).

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Most popular questions from this chapter

Let鈥檚 examine a case using Greg鈥檚 Tunes and Sal鈥檚 Silly Songs. It is now the end of the first year of operations, and the stockholders want to know how well each business came out at the end of the year. Neither business kept complete accounting records, and no dividends were paid. The businesses throw together the data shown on the next page at year-end: \( 23,000 8,000 35,000 22,000 \) 10,000 6,000 44,000 9,000 Total Assets Common Stock Total Revenues Total Expenses Greg鈥檚 Tunes: Sal鈥檚 Silly Songs: Total Liabilities Common Stock Total Expenses Net Income To gain information for evaluating the businesses, the stockholders ask you several questions. For each answer, you must show your work to convince the stockholders that you know what you are talking about.

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