Question

Missing Amounts From Financial Statements

The financial statements at the end of Paradise Realty's first month of operations are shown below.

PARADISE REALTY Income Statement For the Month Ended November 30, 20Y3
Fees earned				$149,300
Operating expenses:
Wages expense		$ (a)
Rent expense		14,400
Supplies expense		12000
Utilities expense		8,100
Miscellaneous expense		4,950
Total operating expenses				(69,300)
Net income				$ (b)

PARADISE REALTY Statement of Stockholders' Equity For the Month Ended November 30, 20Y3
	Common Stock			Retained Earnings			Total
Balances, Nov. 1, 20Y3		$0		$0			$0
Issuance of common stock		270,000					270,000
Net income				(c)			(c)
Dividends				(d)			(d)
Balances, Nov. 30, 20Y3		$270,000		$(e)			$314,000

PARADISE REALTY Balance Sheet November 30, 20Y3
Assets
Cash		$ 99,200
Supplies		6,000
Land		(f)
Total assets		$ (g)
Liabilities
Note payable		$ 7,200
Stockholders' Equity
Common stock	$ (h)
Retained earnings	(i)
Total stockholders' equity		(j)
Total liabilities and stockholders' equity		(k)

PARADISE REALTY Statement of Cash Flows For the Month Ended November 30, 20Y3
Cash flows from operating activities:
Cash received from customers	$ (l)
Deduct cash payments for expenses and payments to creditors	(68,100)
Net cash flows from operating activities		$ (m)
Cash flows used for investing activities:
Cash payments for acquisition of land		(216,000)
Cash flows from financing activities:
Cash received from issuing common stock	$ 270,000
Deduct dividends	(36,000)
Net cash flows from financing activities		(n)
Net increase in cash during month		(o)
Cash as of November 1		0
Cash as of November 30		(o)

Instructions:

1. Would you classify a realty business such as Paradise Realty as a manufacturing, merchandising, or service business?

2. By analyzing the interrelationships among the financial statements, determine the proper amounts for (a) through (o). Enter all amounts as positive numbers.

a. Wages expense	$
b. Net income	$
c. Net income for November	$
d. Dividends	$
e. Retained earnings, November 30, 20Y3	$
f. Land	$
g. Total assets	$
h. Common stock	$
i. Retained earnings	$
j. Total stockholders' equity	$
k. Total liabilities and stockholders' equity	$
l. Cash received from customers	$
m. Net cash flows from operating activities	$
n. Net cash flows from financing activities	$
o. Net cash flow and November 30, 20Y3 cash balance	$

1 more Check My Work uses remaining.

Answer 1

Answer to Part 1.

Paradise Reality is a Service Business, as the Revenue generated during the year is Fee, which is due to Services rendered.

Answer to Part 2.

Answer a.

Total Operating Expenses = Wages Expense + Rent Expense + Supplies Expense + Utilities Expense + Miscellaneous Expense
$69,300 = (a) + $14,400 + $12,000 + $8,100 + $4,950
(a) = $29,850

Answer b.

Net Income = Fees Earned - Total Operating Expenses
(b) = $149,300 - $69,300
(b) = $80,000

Answer c.

Net Income = $80,000
(c) = $80,000

Answer d.

Total Balances, Nov. 30, 20Y3 = Total Balances, Nov. 1, 20Y3 + Issuance of Common Stock + Net Income - Dividend
$314,000 = $0 + $270,000 + $80,000 - (d)
(d) = $36,000

Answer e.

Retained Earnings Balances, Nov. 30, 20Y3 = Retained Earnings Balances, Nov. 1, 20Y3 + Net Income – Dividend
(e) = $0 + $80,000 - $36,000
(e) = $44,000