Question

Majka Company was started on January 1, Year 1. During Year 1, the company experienced the following three accounting events: (1) earned cash revenues of $28,600, (2) paid cash expenses of $13,200, and (3) paid a $1,500 cash dividend to its stockholders. These were the only events that affected the company during Year 1.RequiredRecord the effects of each accounting event under the appropriate general ledger account headings.Prepare an income statement, statement of changes in stockholders’ equity, and a balance sheet dated December 31, Year 1, for Mijka Company.

Answer 1

Answer:

See the explanation below

Explanation:

a. Record the effects of each accounting event under the appropriate general ledger account headings.

Using the accounting equation, we have:

Asset = Shareholder's equity + Liabilities

Cash = Retained earning + Common stock

Cash = $28,600 - $13,200 - $1,500 = $13,900 = Assets

Retained earning = $28,600 - $13,200 - $1,500 = $13,900

Common stock = 0

Retained earning + Common stock = $13,900 + 0 = Shareholder's equity

Liabilities = 0

Therefore, we have:

Majka Company

Accounting Equation for Year 1

Asset ($) = Shareholder's equity + Liabilities

13,900    =      13,900                    +        0

b. Prepare an income statement

Details                                 Amount ($)

Revenue                                28,600

Expenses                               (13,200)

Net Profit                                15,400

Dividend                                (1,500)  

Retained earning                   13,900  

C. Statement of changes in stockholders’ equity

Details                                      Amount ($)                        

Common stock                                0

Beginning retained earning           0

Retained earning for the year     13,900  

Stockholders’ equity                   13,900

d. Mijka Company, Balance sheet as at December 31, Year 1,

Details                                      Amount ($)    

Assets:

Cash                                            13,900

Liabilities:  

Current and Long terms                  0      

Net total assets                           13,900  

Stockholders’ equity:

Common stock                                0

Retained earning                         13,900  

Stockholders’ equity                   13,900

Answer 2

1. Recording the effects of the accounting events of Majka Company under the appropriate general ledger account headings are as follows:

Journal Entries:

Debit Cash $28,600

Credit Revenue $28,600

Debit Expenses $13,200

Credit Cash $13,200

Debit Dividend $1,500

Credit Cash $1,500

General Ledger:

Cash Account

Account Titles        Debit      Credit

Revenue             $28,600

Expenses                           $13,200

Dividend                              $1,500

Balance                              $13,900

Revenue Account

Account Titles        Debit      Credit

Cash                                   $28,600

Expenses Account

Account Titles        Debit      Credit

Cash                   $13,200

Dividend Account

Account Titles        Debit      Credit

Cash                     $1,500

Trial Balance

As of December 31, Year 1

Account Titles        Debit      Credit

Cash                     $13,900

Expenses               13,200

Dividends                1,500

Revenue                            $28,600

Totals                 $28,600 $28,600

2. Majka Company

Income Statement

For Year 1 ended December 31

Revenue       $28,600

Expenses         13,200

Net income    $15,400

3. Majka Company

Statement of Changes in Stockholders' Equity

For Year 1 ended December 31

Net income             $15,400

Dividend                     1,500

Retained earnings $13,900

4. Majka Company

Balance Sheet

As of December 31, Year 1

Assets:

Cash                        $13,900

Equity:

Retained earnings $13,900

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