Question

Determine financial statement amounts and prepare owner's equity statement.

(LO 4, 5)

Financial statement information about four different companies is as follows.

Alpha Company Beta Company Psi Company Omega Company
January 1, 2017
Assets $ 80,000 $ 90,000 (g) $150,000
Liabilities   41,000 (d)   80,000 (j)
Owner's equity (a)   40,000   49,000   90,000
December 31, 2017
Assets (b)  112,000  170,000 (k)
Liabilities   60,000   72,000 (h)  100,000
Owner's equity   50,000 (e)   82,000  151,000
Owner's equity changes in year
Additional investment (c)    8,000   10,000   15,000
Drawings   15,000 (f)   12,000   10,000
Total revenues  350,000  410,000 (i)  500,000
Total expenses  333,000  385,000  350,000 (l)
Instructions

(a)

Determine the missing amounts.

(Hint: For example, to solve for (a), Assets hyphen Liabilities equals Owner's equity equals dollar-sign Baseline 39,000.)

(b)

Prepare the owner's equity statement for Alpha Company.

(c)

Write a memorandum explaining the sequence for preparing financial statements and the interrelationship of the owner's equity statement to the income statement and balance sheet.

Answer 1

Answer and Explanation:

a. The first part is presented in the attached spreadsheet

b. The presentation is shown below:

Owner’s equity statement for Alpha Company:-

Particulars Amount($)

Opening balance 39,000

Additional investment 9,000

Income from operation 17,000

Available total equity 65,000

Less - Drawings -15,000

Closing balance 50,000

c) For preparing the financial statements, the first part is to pass journal entries, than positing into ledger after that the income statement is made and then the stockholder equity and balance sheet are made

As the income statement records all revenues and expenses for the company . The same net profit or net loss is shown in the statement of stockholder equity and the closing balances of the retained earning and the common stock are recognized in the balance sheet along with the assets.