Critz Company was started on January 1, Year 1. During the month

Critz Company was started on January 1, Year 1. During the month of January, Critz earned $7,500 of revenue and incurred $4,800 of expenses. During the remainder of Year 1, Critz earned $86,000 and incurred $51,000 of expenses. Critz closes its books on December 31 of each year.

Required

a. Determine the balance in the Retained Earnings account as of January 31, Year 1.

b. Determine the balance in the Revenue and Expense accounts as of January 31, Year 1.

c. Determine the balance in the Retained Earnings account as of December 31, Year 1, before closing.

d. Determine the balances in the Revenue and Expense accounts as of December 31, Year 1, before closing.

e. Determine the balance in the Retained Earnings account as of January 1, Year 2.

f. Determine the balance in the Revenue and Expense accounts as of January 1, Year 2.

As of December 31, Year 3, Flowers Company had total assets of

As of December 31, Year 3, Flowers Company had total assets of $130,000, total liabilities of $50,000, and common stock of $70,000. The company’s Year 3 income statement contained revenue of $30,000 and expenses of $18,000. The Year 3 statement of changes in stockholders’ equity stated that $3,000 of dividends were paid to investors.

Required

a. Determine the before-closing balance in the Retained Earnings account on December 31, Year 3.

b. Determine the after-closing balance in the Retained Earnings account on December 31, Year 3.

c. Determine the before-closing balances in the Revenue, Expense, and Dividend accounts on December 31, Year 3.

d. Determine the after-closing balances in the Revenue, Expense, and Dividend accounts on December 31, Year 3.

e. Explain the difference between common stock and retained earnings.

f. On January 1, Year 4, Flowers Company raised $30,000 by issuing additional common stock. Immediately after the additional capital was raised. Flowers reported total stockholders’ equity of $110,000. Are the stockholders of Flowers in a better financial position than they were on December 31, Year 3?

Corrugated Boxes Inc. is a U.S.-based company that develops its financial statements

Corrugated Boxes Inc. is a U.S.-based company that develops its financial statements under GAAP. The total amount of the company’s assets shown on its balance sheet was approximately $305 million. The president of Corrugated is considering the possibility of relocating the company to a country that practices accounting under IFRS. The president has hired an international accounting firm to determine what the company’s statements would look like if they were prepared under IFRS. One striking difference is that under IFRS the assets shown on the balance sheet would be valued at approximately $345 million.

Required

a. Would Corrugated Boxes’s assets really be worth $40 million more if it moves its headquarters?

b. Discuss the underlying conceptual differences between U.S. GAAP and IFRS that cause the differencein the reported asset values. 

Mijka Company was started on January 1, Year 1. During Year 1,

Mijka 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, 

(3) Paid a $1,500 cash dividend to its stockholders. These were the only events that affected the company during Year 1.

Required

a. Create an accounting equation and record the effects of each accounting event under the appropriate general ledger account headings.

b. Prepare an income statement, statement of changes in stockholders’ equity, and a balance sheet dated December 31, Year 1, for Mijka Company.

c. Explain why the income statement uses different terminology to date the income statement than is used to date the balance sheet.

Obtain the Target Corporation’s annual report for its 2018 fiscal year (year

Obtain the Target Corporation’s annual report for its 2018 fiscal year (year ended February 2, 2019) at http://investors.target.com using the instructions in Appendix A, and use it to answer the following questions:

a. What was Target’s net income for 2018 (the year ended February 2, 2019)?

b. Did Target’s net income increase or decrease from 2017 to 2018, and by how much?

c. What was Target’s accounting equation for 2018?

d. Which of the following had the largest percentage change from 2017 to 2018: net sales; cost of sales; or selling, general, and administrative expenses? Show all computations.

On January 1, Year 3, the following information was drawn from the

On January 1, Year 3, the following information was drawn from the accounting records of Carter Company: cash of $800; land of $3,500; notes payable of $600; and common stock of $1,000.

Required

a. Determine the amount of retained earnings as of January 1, Year 3.

b. After looking at the amount of retained earnings, the chief executive officer (CEO) wants to pay a $1,000 cash dividend to the stockholders. Can the company pay this dividend? Why or why not?

c. As of January 1, Year 3, what percentage of the assets were acquired from creditors? Round to three decimal places.

d. As of January 1, Year 3, what percentage of the assets were acquired from investors? Round to three decimal places.

e. As of January 1, Year 3, what percentage of the assets were acquired from retained earnings? Round to three decimal places.

f. Create an accounting equation using percentages instead of dollar amounts on the right side of the equation.

g. During Year 3, Carter Company earned cash revenue of $1,800, paid cash expenses of $1,200, and paid a cash dividend of $500. Prepare an income statement, statement of changes in stockholders’ equity, a balance sheet, and a statement of cash flows dated December 31, Year 3. It is helpful to record these events under an accounting equation before preparing the statements.

h. Comment on the terminology used to date each statement.

i. An appraiser determines that as of December 31, Year 3, the market value of the land is $4,200. How will this fact change the financial statements?

j. What is the balance in the Revenue account on January 1, Year 4?

The following account balances were drawn from the financial records of Kent

The following account balances were drawn from the financial records of Kent Company (KC) as of January 1, Year 5: Assets, $35,000; Liabilities, $6,000; Common Stock, $12,000; and Retained Earnings, $17,000. KC has agreed to pay the creditors $400 of interest per year. Further, KC agrees that for the Year 5 fiscal year any annual earnings remaining after the interest charges will be paid out as dividends to the owners.

Required

a. Assuming KC earns a before interest expense recognition profit of $1,600 during Year 5, determine the amount of interest and dividends paid.

b. Assuming KC earns a before interest expense recognition profit of $900 during Year 5, determine the amount of interest and dividends paid.

c. Assuming KC earns a before interest expense recognition profit of $300 during Year 5, determine the amount of interest and dividends paid.

At the beginning of Year 2, Better Corp.’s accounting equation showed the

At the beginning of Year 2, Better Corp.’s accounting equation showed the following accounts and balances:

Better Corp. completed the following transactions during Year 2:

1. Purchased land for $5,000 cash.

2. Acquired $25,000 cash from the issue of common stock.

3. Received $75,000 cash for providing services to customers.

4. Paid cash operating expenses of $42,000.

5. Borrowed $10,000 cash from the bank.

6. Paid a $5,000 cash dividend to the stockholders.

7. Determined that the market value of the land purchased in event 1 is $35,000.

Required

a. Record the transactions in the accounting equation for Year 2. Record the amounts of revenue, expense, and dividends in the Retained Earnings column. Provide the appropriate titles for these accounts in the last column of the table.

b. As of December 31, Year 2, determine the total amount of assets, liabilities, and stockholders’ equity and present this information in the form of an accounting equation.

c. What is the amount of total assets, liabilities, and stockholders’ equity as of January 1, Year 3?

The financial condition of White Co. Inc. is expressed in the following

The financial condition of White Co. Inc. is expressed in the following accounting equation:

Required

a. Are dividends paid to creditors or investors? Explain why.

b. How much cash is in the Retained Earnings account?

c. Determine the maximum dividend White Co. Inc. can pay.

d. If the obligation to creditors is due, can White Co. Inc. repay the loan? Why or why not?

e. Suppose the land sinks into the sea as a result of an earthquake and a resulting tsunami. The business is then liquidated. How much cash will creditors receive? How much cash will investors receive? Assume there are no legal fees or other costs of liquidation.

Love Company’s accounting records show an after-closing balance of $42,100 in its

Love Company’s accounting records show an after-closing balance of $42,100 in its Retained Earnings account on December 31, Year 5. During the Year 5 accounting cycle, Love earned $19,400 of revenue, incurred $9,800 of expense, and paid $500 of dividends. Revenues and expenses were recognized evenly throughout the accounting period.

Required

a. Determine the balance in the Retained Earnings account as of January 1, Year 6.

b. Determine the balance in the temporary accounts as of January 1, Year 5.

c. Determine the after-closing balance in the Retained Earnings account as of December 31, Year 4.

d. Determine the balance in the Retained Earnings account as of June 30, Year 5.