1)Calculate the missing item in each of the following cases.

Case A / Case B / Case C
Assets / $16,000 / ? / $4,000
Liabilities / 5,000 / $22,000 / ?
Stockholders’ Equity / ? / 38,000 / 3,000

Case A:
Assets = Liabilities + Stockholders’ Equity
$16,000 = $5,000 + x
x = $11,000

Case B:
Assets = Liabilities + Stockholders’ Equity
x = $22,000 + 38,000
x = $60,000

Case C:
Assets = Liabilities + Stockholders’ Equity
$4,000 = x + $3,000
x = $1,000

2)Part A: Indicate (with an X) whether each account would be reported as an asset, liability, or stockholders’ equity item on the balance sheet of Cyclone Corporation as of December 31, 2010. If the account would not be reported on the balance sheet, check the appropriate column.

Amount / Asset / Liability / Stockholders’ Equity / Not on Balance Sheet
Accounts Payable / $540 / X
Accounts Receivable / 210 / X
Buildings / 790 / X
Cash / 640 / X
Contributed Capital / 950 / X
Cost of Goods Sold / 230 / X
Dividends / 110 / X
Income Tax Expense / 50 / X
Inventory / 130 / X
Investments / 370 / X
Land / 840 / X
Long-term Debt (due in 2014) / 260 / X
Notes Payable (due in 2010) / 250 / X
Revenues / 930 / X
Supplies / 100 / X
Retained Earnings / ? / X

Part B: Using the information from Part A, determine the amount of retained earnings as of December 31, 2010.

Assets = Liabilities + Stockholders’ Equity
Assets = Liabilities + (Contributed Capital + Retained Earnings)

$3,080 = $1,050 + ($950 + Retained Earnings)
Retained Earnings = $1,080

Part C: After checking your answers to Parts A and B with the SI Leader, prepare a balance sheet on the attached page for Cyclone Corporation as of December 31, 2010.
(If you are stuck, Exhibit 1.4 on page 12 of the textbook might be of assistance. Don’t be afraid to ask for help!)

3)Use the following information for Campanile Creations, Inc. to work parts A through D.
If your team doesn’t have time to complete this during SI, this exercise makes great self-study practice! Answers will be posted on the SI website.
(If you get stuck, look back to the formulas for each of the financial statements. Exhibit 1.7 on page 16 of the textbook is a good resource.)

Assets / $54,600 / Ending Cash / $16,224
Beginning Cash / 12,456 / Ending Retained Earnings / 28,220
Beginning Retained Earnings / 25,820 / Expenses / 27,600
Cash Flows from Investing Activities / (5,430) / Liabilities / 21,250
Cash Flows from Financing Activities / (6,512) / Net Income / 3,900
Cash Flows from Operating Activities / 15,710 / Revenue / 31,500
Dividend / 1,500 / Stockholders’ Equity / 33,350

Part A: Determine that the balance sheet is in balance.
Assets = Liabilities + Stockholders’ Equity
$54,600 = $21,250 + $33,350
The balance sheet is in balance.

Part B: Determine that net income amount was properly calculated.
Net Income = Revenues – Expenses
$31,500 - $27,600 = $3,900
Net income was properly calculated.

Part C: Determine what caused changes in retained earnings during the year.
Ending RE = Beginning RE + Net Income – Dividends
$25,820 + $3,900 - $1,500 = $28,220
The changes in retained earnings can be accounted for using the formula above.

Part D: Determine what caused the change in the cash account.
Change in Cash = Cash Flows from Operating Activities + Cash Flows from Investing Activities + Cash Flows from Financing Activities
$15,710 + (-$5,430) + (-$6,512) = $3,768
Beginning Cash + Change in Cash = Ending Cash
$12,456 + $3,768 = $16,224

Campanile Creations, Inc.
Balance Sheet
July 31, 2010

Assets
Cash
Accounts Receivable
Inventory
Supplies
Investments
Land
Buildings
Total Assets
Liabilities
Accounts Payable
Notes Payable
Long-term Debt
Total Liabilities
Stockholders’ Equity
Contributed Capital
Retained Earnings
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
$ 640
210
130
100
370
840
790_____
$3,080 _ ___
$ 540
250
260_____
1,050 _____
950
1,080_____
2,030_____
$3,080 _____