Question

The Containers Inc. experienced the following events during its first year of operations,

Year 1:
Acquired $42,000 cash by issuing common stock.
Earned $25,000 revenue on account.
Paid $18,000 cash for operating expenses.
Borrowed $10,000 cash from a bank.
Collected $22,000 of the balance in accounts receivable.
Paid a $1,000 cash dividend.

Required

a. Would the accounts receivable account appear in the assets, liabilities, or stockholders' equity section of the December 31, Year 1, balance sheet?
b. Determine the balance of the accounts receivable account that would appear on the December 31, Year 1, balance sheet.
c. Determine the amount of net income that would appear in the Year 1 income statement.
d. Determine the amount of the cash flow from operating activities that would appear in the Year 1 statement of cash flows.

Answer 1

Answer:

a. Would the accounts receivable account appear in the assets, liabilities, or stockholders' equity section of the December 31, Year 1, balance sheet?

The accounts receivable account would appear in the assets section, and more specifically, in the current assets section. This is because accounts receivable are considered to be an assset.

b. Determine the balance of the accounts receivable account that would appear on the December 31, Year 1, balance sheet.

The Containeres Inc. first earned $25,000 on account, and by the end of the year, it had collected $22,000, thus, the final balance of the accounts receivable is $3,000.

c. Determine the amount of net income that would appear in the Year 1 income statement.

Net Income = Revenue - Expenses

Net Income = $25,00 - $18,000

                   = $7,000