Chapter 1 Activity
B/S A= L + S/E (stockholderes’ equity)
2. If a company has assets of $230,000 and liabilities of $80,000, what is the amount of stockholders’
equity?
$230,000= $80,000 + S/E
S/E= $150,000
3. What is the fully expanded accounting equation?
A= L + S/E
Common stock+ retained earnings= Stockholders’ equity
R/E= Revenues + expenses + dividends
4. What is the equation to calculate net income?
Income statement: Revenues- Expenses= N/I (net income)
5. What is the equation to calculate retained earnings?
Beginning Balance. R/E + N/I – Dividends= End balance R/E
1. What is the accounting equation?
For each account listed below, appropriately categorize as:
Asset (A)
Liability (L)
Stockholders’ Equity (S/E)
Revenue (R)
Expense (E)
Dividend (D)
1. Common Stock S/E
2. Inventory A
3. Service Revenue R
4. Cash A
5. Utilities Expense E
6. Retained Earnings S/E
7. Accounts Payable L
8. Accounts Receivable A
9. Salaries Expense E
10. Equipment A
11. Land A
12. Dividends D
13. Rent Expense E
14. Supplies A
Note: Revenues, expenses, and dividends do all fall under Stockholders’ Equity. However, it is typical to
identify them specifically as a revenue, expense, or dividend account, and not just Stockholders’ Equity.
Please do so for this activity.
Alladin Travel, Inc., began operations on April 1, 2020. During April, the business provided services for
customers. It is now April 30, and the company is ready to prepare financial statements. Below is the data
that has been collected:
Accounts payable L-> B/S $1,800
Accounts receivable A-> B/S 2,000
Cash balance, April 1 -
Cash balance, April 30 A-> B/S 33,300
Common Stock S/E ->B/S 50,000
Land A -> B/S 18,000
Dividends D -> R/E 2,100
Rent expense E -> I/S 1,100
Retained earnings, April 1 S/E-> R/E -
Retained earnings, April 30 S/E -> R/E and B/S ?
Salary expense E -> I/S 1,200
Service revenue R -> I/S 10,000
Supplies A -> B/S 3,700
Utilities expense E -> I/S 400
Required: Prepare the company’s income statement and statement of retained earnings for the month
ended April 30, 2020, and the balance sheet as of April 30, 2020. Draw arrows linking the statements.
Discussion points:
Did the company perform well during its first month of operations? I/S
Where does the company stand financially at the end of April? B/S
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