Accounting Basics Worksheet Part 1. Accounting in Business

Accounting Basics WorksheetPart 1. Accounting in BusinessDiscuss the role of accounting in business by listing 5 different uses for accounting in the space below. Use this week’s content, readings, and your LIRN resources or the Internet, as needed, to support your answer.Part 2. Financial StatementsListed below are questions posed by various users of a company’s financial statements. Fill in the blank with the financial statement(s) the user would most likely use to find this information. Your choices are the income statement, balance sheet, statement of retained earnings, and/or the statement of cash flows.Enter your answer into the shaded boxes in the table below (6 answers).User Question Financial Statement(s)Stockholder How did this year’s sales figures compare with last year’s sales figures?Banker How much in borrowings does the company currently owe?Supplier How much does the company owe its suppliers in total?Stockholder Did the company have any dividends in the prior year?Advertising agent How much advertising did the company incur in order to generate sales?Banker What was the company’s total interest cost last year?Part 3. Net Income and Retained EarningsNova Corporation reports the following as of December 31:Revenues $ 10,000Beginning retained earnings 20,000Expenses 8,000Dividends 1,000Calculate net income and ending retained earnings for the year ending December 31. Refer to your text and lesson for the calculations. Enter your answers in the shaded boxes below (2 answers).Net Income Ending Retained Earnings Part 4. Links Between Financial StatementsThe following are incomplete financial statements for Sterling Inc. Calculate the missing amounts and enter your answers into the shaded boxes for each statement (5 answers).TIP: Work this problem in reverse, starting with the Statement of Retained Earnings. Using your knowledge of the accounting equation and the interrelationship among the financial statements, you can solve for the missing amounts by making it a simple math problem.Balance SheetAssetsCash $ 8,000Inventory 22,000Building 40,000Total Assets $ 70,000LiabilitiesAccounts payable $ 7,000EquityContributed capital Retained earnings Total liabilities & equity $ 70,000Income StatementService revenue $ 90,000Salaries expense Utilities expense 20,000Net income Statement of Retained EarningsRetained earnings, beginning balance $ 20,000Net income Dividends 10,000Retained earnings, ending balance $ 60,000Part 5. Prepare Financial StatementsThe following items are available from the records of Honky Tonk Records Inc. at the end of the year:Accounts payable $ 27,000Accounts receivable 21,000Advertising expense 6,000Buildings 76,000Contributed capital 30,000Cash 6,320Notes payable 70,000Salaries expense 9,500Service revenue 16,820Equipment 25,000Prepare Honky Tonk’s income statement and statement of retained earnings for the year and its balance sheet at the end of the year. Enter your information into the shaded boxes of the statements below.TIP: Net income is the difference between revenue and expenses. The ending balance of retained earnings is not provided. You can solve for it by using the accounting equation or using the “BIDE” formula (Beginning retained earnings plus net Income (or less net loss), less Dividends equals Ending retained earnings). Remember that the beginning balance of retained earnings is $0 and no dividends were paid. a. Income Statement (7 answers)Honky Tonk Records Inc.Income Statement For Year Ending December 31Service Revenue $Expenses: Total Expenses Net Income $b. Statement of Retained Earnings (4 answers)Honky Tonk Records Inc.Statement of Retained EarningsFor Year Ending December 31Retained earnings, January 1 +Net income -Dividends Retained earnings, December 31 c. Balance Sheet (20 answers)Honky Tonk Records Inc.Balance SheetDecember 31ASSETSTotal Assets LIABILITIES AND EQUITYTotal Liabilities Total Equity Total Liabilities and Equity