CHAPTER 3.

FINANCIAL STATEMENTS

P1.3A (LO 4) AP The following selected data are for Carducci Importers for its first three
years of operations:

20X9 20X0 20X1

January 1:
$ 40,000
Total assets $ (f) $ (j)
0
Total liabilities 50,000 (k)
(a)
Total owner’s equity 75,000 (l)

December 31:
(b) 140,000 172,000
Total assets
50,000 (g) 65,000
Total liabilities
(c) 97,000 (m)
Total owner’s equity
Changes during year in owner’s equity:
0
Investments by owner during the year 7,000 (n)
(h)
Drawings by owner during the year 15,000 36,000

Profit or loss for the year (d) 40,000 (o)

Total revenues for the year 132,000 (i) 157,000
Total expenses for the year (e) 95,000 126,000
Instructions
Determine the missing amounts.

E1.15 (LO 3) AP Atlantic Cruise Co. is owned by Irina Temelkova. The following
information is an alphabetical listing of financial statement items for the company for the
year ended May 31, 2021:
Interest expense $ 20,960
Accounts payable $ 47,750
Accounts receivable 42,950 Investments by owner 5,847
Advertising expense 3,640 Maintenance expense 82,870
Building 122,570 Notes payable 379,000
Cash 20,080 Other expenses 66,500
Equipment 553,300 Prepaid insurance 1,283
I. Temelkova, capital, June 1, 2020 311,182 Revenue 350,640
Temelkova, drawings 33,950 Salaries expense 126,950
Insurance expense 2,566 Supplies 16,800

Instructions
Prepare an income statement and a statement of owner’s equity for the year.
Prepare the balance sheet.

E1.17 (LO 3) AP Judy Cumby is the sole owner of Deer Park, public camping ground near
Gros Morne National Park. Judy has gathered the following financial information for the year
ended March 31, 2021:
Revenues—camping fees $150,000
 Revenues—general store $ 40,000
Operating expenses 150,000
Cash on hand 9,400
Supplies on hand 2,500
The original cost of equipment 110,000
The fair value of equipment 125,000
Notes payable 70,000
Accounts payable 11,500
J. Cumby, capital, April 1, 2020 17,000
Accounts receivable 21,000
J. Cumby, drawings 5,000
Camping fees collected for April 10,000
Insurance paid for in advance for April to June 2021 600
Instructions
a. Calculate Deer Park’s profit for the year.
b. Calculate Judy’s owner’s equity for the period as at March 31, 2021.
c. Prepare a balance sheet at March 31, 2021
P1.7A (LO 3, 4, 5, 6) AP The following events concern Anita LeTourneau, a Manitoba law
school graduate, for March 2021:
1. On March 4, she spent $20 on a lottery ticket.
2. On March 7, she won $250,000 in the lottery and immediately quit her job as a junior
lawyer.
3. On March 10, she decided to open her own law practice, and deposited $50,000 of her
winnings in a business chequing account, LeTourneau Legal Services.
4. On March 14, she purchased a new luxury condominium with a down payment of
$150,000
from her personal funds plus a home mortgage of $200,000.
5. On March 15, Anita signed a rental agreement for her law offi ce space for $2,500 a
month, starting March 15. She paid the fi rst month’s rent, as it is due on the 15th of each
month.
6. On March 19, she hired a receptionist. He will be paid $500 a week and will begin working
on March 24.
7. On March 20, she purchased equipment for her law practice from a company that had just
declared bankruptcy. The equipment was worth at least $15,000 but Anita was able to buy it
for only $10,000.
8. On March 21, she purchased $400 of supplies on account.
9. On March 24, she purchased an additional $6,500 of equipment for her law practice for
$3,000 plus a $3,500 note payable due in six months.
10. On March 31, she performed $3,500 of legal services on account.
11. On March 31, she received $2,500 cash for legal services to be provided in April.
12. On March 31, she paid her receptionist $500 for the week.
13. On March 31, she paid $400 for the supplies purchased on account on March 21.
Instructions
a. Prepare a tabular analysis of the effects of the above transactions on the accounting
equation.
b. Calculate profit and owner’s equity for the month ended March 31.
c. Prepare a balance sheet at March 31.
P1.8A (LO 4, 5, 6) AP Izabela Jach opened a medical office under the name Izabela Jach,
MD, on August 1, 2021. On August 31, the balance sheet showed Cash $3,000; Accounts
Receivable $1,500; Supplies $600; Equipment $7,500; Accounts Payable $5,500; Note
Payable $3,000; and I. Jach, Capital, $4,100. During September, the following transactions
occurred:

Sept.4 Collected $800 of accounts receivable.

5. Provided services of $10,500, of which $7,700 was collected from patients and the
remainder was on account.
7. Paid $2,900 on accounts payable.
12. Purchased additional equipment for $2,300, paying $800 cash and leaving the
balance on account.
15. Paid salaries, $2,800; rent for September, $1,900; and advertising expenses, $275.
18. Collected the balance of the accounts receivable from August 31.
20. Withdrew $1,000 for personal use.
26. Borrowed $3,000 from the Bank of Montreal on a note payable.
28. Signed a contract to provide medical services, not covered under the government
health
plan, to employees of CRS Corp. in October for $5,700. CRS Corp. will pay the amount
owing after the medical services have been provided.
29. Received the telephone bill for September, $325.
30. Billed the government $10,000 for services provided to patients in September.
Instructions
a. Beginning with the August 31 balances, prepare a tabular analysis of the effects of the
September transactions on the accounting equation.
b. Prepare an income statement and statement of owner’s equity for September, and a balance
sheet at September 30.