Purpose of statement of changes in stockholder equity


Response to the following problem:

You are an accountant for The Flower Shoppe. Your supervisor has asked you to help her prepare the year-end financial statements. Before you do, she wants to ensure that you understand some main points.

1. Explain the following:

? The elements of the balance sheet, their purposes, and how to measure them

? The elements and purpose of the statement of changes in stockholder's equity

2. Based on the adjusted trial balance and additional information, prepare the following in an Excel file to give to the controller for review:

? Balance sheet

? Income statement

? Statement of retained earnings

? Statement of cash flows

The following is additional information about the Flower Shoppe that is needed for financial-statement preparation:

? Net income for the year ended December 31, 2008 was $10,845.

? Changes from the prior year's balances included the following:

? a decrease in accounts receivable of $300.

? a decrease in inventory of $450.

? an increase in accounts payable of $250.

? an decrease in accrued expenses of $100.

? Land was purchased in April for $3,500.

? Cash as of January 1, 2008 was $10,105.

The Flower Shoppe

Adjusted Trial Balance

December 31, 2008

 

Debit

Credit

Cash

$22,750

 

Accounts Receivable

3,200

 

Inventory

8,000

 

Land

27,000

 

Building

56,000

 

Accumulated Depreciation

 

16,800

Accounts Payable

 

4,600

Accrued Expenses

 

2,500

Common Stock

 

20,000

Additional Paid-in Capital

 

10,000

Dividends

1,200

 

Retained Earnings

 

53,405

Sales

 

112,020

Returns

1,300

 

Purchases

47,000

 

Salaries

38,000

 

Supplies

870

 

Utilities

5,225

 

Telephone

2,850

 

Bank Charges

330

 

Depreciation Expense

5,600

 

 

$219,325

$219,325

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Managerial Accounting: Purpose of statement of changes in stockholder equity
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