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:
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LITTLE FOLKS BASEBALL |
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Assets |
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Cash |
$56,000 |
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Accounts Receivable |
80,000 |
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Land |
600,000 |
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Total assets |
$736,000 |
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Liabilities and Stockholders” Equity |
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Liabilities: |
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Accounts payable |
$64,000 |
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Stockholders” Equity: |
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Capital stock |
$400,000 |
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Retained earnings |
272,000 |
672,000 |
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Total liabilities and stockholders” equity |
$736,000 |
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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.)
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TARGET-LINE GOLF DRIVING RANGE |
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May 31, |
April 30, |
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2010 |
2010 |
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Assets |
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Cash |
$56,400 |
$46,800 |
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Land |
163,200 |
144,000 |
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Total assets |
$219,600 |
$190,800 |
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Liabilities and Stockholders” Equity |
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Accounts payable |
$18,000 |
$27,600 |
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Capital stock |
144,000 |
144,000 |
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Retained earnings |
57,600 |
19,200 |
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Total liabilities and stockholders” equity |
$219,600 |
$190,800 |
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TARGET-LINE GOLF DRIVING RANGE |
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Revenues: |
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Service revenue |
$64,000 |
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Expenses: |
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Salaries expense |
$16,000 |
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Equipment rental expense |
9,600 |
25,600 |
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Net income |
$38,400 |
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All revenues earned are on account.
State the probable cause(s) of the change in each of the balance sheet accounts from April 30 to 2010 May 31.