Page 57 - Accounting Principles (A Business Perspective)

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Capital stock 114000

Retained earnings as of 2010 June 1 84900

a. Prepare an income statement for June 2010.
b. Prepare a statement of retained earnings for June 2010.
c. Prepare a balance sheet as of 2010 June 30.
d. How solvent does this company appear to be?
Problem D Little Folks Baseball, Inc., was formed by a group of parents to meet a need for a place for kids to
play baseball. At the beginning of its second year of operations, its balance sheet appeared as follows:

LITTLE FOLKS BASEBALL
Balance Sheet 2010 April 30
Assets
Cash $ 56,000
Accounts Receivable 80,000
Land 600,000
Total assets $ 736,000
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable $ 64,000
Stockholders' Equity:
Capital stock $ 400,000
Retained earnings 272,000 672,000
Total liabilities and stockholders' equity $ 736,000
The summarized transactions for May 2010 are as follows:

a. Issued additional capital stock for cash, USD 200,000.
b. Collected USD 80,000 on accounts receivable.
c. Paid USD 64,000 on accounts payable.
d. Received membership fees from parents (nonrefundable): in cash, USD 260,000; and on account, USD
120,000.
e. Incurred operating expenses: for cash, USD 60,000; and on account, USD 160,000.
f. Paid dividends of USD 16,000.
g. Purchased more land for cash, USD 96,000.
h. Placed an order for new equipment expected to cost USD 120,000.

a. Prepare a summary of transactions (see Part A of Exhibit 4) using column headings as given in the balance
sheet. Determine balances after each transaction.
b. Prepare an income statement for May 2010.
c. Prepare a statement of retained earnings for May 2010.
d. Prepare a balance sheet as of 2010 May 31.
The balance sheets for 2010 May 31, and 2010 April 30, and the income statement for May of the Target-Line
Golf Driving Range follow. (Common practice is to show the most recent period first.)

TARGET-LINE GOLF DRIVING RANGE
Comparative Balance Sheet
May 31, April 30,

Accounting Principles: A Business Perspective 58 A Global Text