The financial statements at the end of Atlas Realty’s first month of operations are shown below.

The financial statements at the end of Atlas Realty’s first month of operations are shown below.


Atlas Realty
Income Statement
For the Month Ended May 31, 2014
Fees earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $400,000
Expenses:
Wages expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (a)
Rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,000
Supplies expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,600
Utilities expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,400
Miscellaneous expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (b)
Atlas Realty
Statement of Owner’s Equity
For the Month Ended May 31, 2014
LuAnn Martin, capital, May 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (c)
Investment on May 1, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (d)
Net income for May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e)
$ (f)
Less withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (g)
Increase in owner’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (h)
LuAnn Martin, capital, May 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (i)
Atlas Realty
Balance Sheet
May 31, 2014
Assets Liabilities
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $123,200 Accounts payable . . . . . . . . . . . . . . . . . . . . $48,000
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,800 Owner’s Equity
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (j) LuAnn Martin, capital . . . . . . . . . . . . . . . . (l)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ (k) Total liabilities and owner’s equity . . . . $ (m)
Atlas Realty
Statement of Cash Flows
For the Month Ended May 31, 2014
Cash flows from operating activities:
Cash received from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (n)
Deduct cash payments for expenses and payments to creditors . . . . . . (252,800)
Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (o)
Cash flows from investing activities:
Cash payments for acquisition of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (120,000)
Cash flows from financing activities:
Cash received as owner’s investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160,000
Deduct cash withdrawal by owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (64,000)
Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (p)
Net increase (decrease) in cash and May 31, 2014, cash balance . . . . . . . $ (q)


Instructions

By analyzing the interrelationships among the four financial statements, determine the proper amounts for (a) through (q).


Answer:
a. Wages expense, $203,200 ($288,000 – $48,000 – $17,600 – $14,400 – $4,800)

b. Net income, $112,000 ($400,000 – $288,000)

c. LuAnn Martin, capital, May 1, 2014, $0; Atlas Realty was organized on May 1, 2014.

d. Investment on May 1, 2014, $160,000; from statement of cash flows.

e. Net income for May, $112,000; from (b)

f. $272,000 ($160,000 + $112,000)

g. Withdrawals, $64,000; from statement of cash flows.

h. Increase in owner’s equity, $208,000 ($272,000 – $64,000)

i. LuAnn Martin, capital, May 31, 2014, $208,000

j. Land, $120,000; from statement of cash flows.

k. Total assets, $256,000 ($123,200 + $12,800 + $120,000)

l. LuAnn Martin, capital, $208,000

m. Total liabilities and owner’s equity, $256,000 ($48,000 + $208,000)

n. Cash received from customers, $400,000; this is the same as fees earned since there are no accounts receivable.

o. Net cash flows from operating activities, $147,200 ($400,000 – $252,800)

p. Net cash flows from financing activities, $96,000 ($160,000 – $64,000)

q. Net cash flows and May 31, 2014, cash balance, $123,200 ($147,200 – $120,000 + $96,000); also, the cash balance on the balance sheet.