During 2019, Winterset Company performed services for which customers paid or promised to pay a total of $587,000. Of th

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answerhappygod
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During 2019, Winterset Company performed services for which customers paid or promised to pay a total of $587,000. Of th

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During 2019, Winterset Company performed services for which customers paid or promised
to pay a total of $587,000. Of this amount, $552,000 had been collected by year-end. Winterset
paid $340,000 in cash for employee wages and owed the employees $15,000 at the end of the
year for work that had been done but had not paid for. Winterset paid interest expense of $3,000
and $195,000 for other service expenses. The income tax rate was 35%, and income taxes had
not yet been paid at the end of the year. Winterset declared and paid dividends of $20,000. There
were no other transactions that affected cash.

1. What was the amount of the increase or decrease in cash during the year?
2. Prepare an income statement for Winterset for the year 2019.
3. At the beginning of 2019, Winterset's retained earnings were $90,000. Prepare a statement of
stockholders' equity with only a column for retained earnings.
Answer:
1.
Amount of increase or decrease in cash:
$552,000 Collected from customers
(340,000) Paid to employees
(3,000) Interest expense
(195,000) Other service expense
(20,000) Dividends
($6,000) Decrease in cash
2.
Winterset Company
Income Statement
For the Year Ended December 31, 2019
Revenues:
Service revenue $587,000
Total revenues $587,000
Expenses:
Wages expense 355,000
Service expense 195,000
Interest expense 3,000
Total expenses 553,000
Pretax income 34,000
Income tax expense 11,900
Net income $22,100
3.
Winterset Company
Statement of Stockholders' Equity
For the Year Ended December 31, 2019
Retained earnings, January 1, 2019 $90,000
Net income 22,100
Dividends (20,000)
Retained earnings, December 31, 2019 $92,100
Difficulty: 3 Hard
Topic: Distinguish different financial statements
Learning Objective: 01-01 Recognize the information conveyed in each of the four basic
financial statements and the way that it is used by different decision makers (investors, creditors,
and managers).
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