1TheEnvironmentofFinancialReporting

IntermediateAccounting1TheEnvironmentofFinancialReportingForewords

CoursenatureandobjectiveTeachingmethodsTestrequirementsandformScoringsystemBriefcontents

IntermediateAccounting1TheEnvironmentofFinancialReportingI. Accountinginformation:users,uses,andGAAPinU.S.A.

Companiesmayobtaincapitalby

issuingcapitalstockorbyborrowingfromlenders

StockExchangeBank

IntermediateAccounting1TheEnvironmentofFinancialReporting“Accountingisaserviceactivity.Itsfunctionistoprovidequantitativeinformation,primarilyfinancialinnature,abouteconomicentitiesthatisintendedtobeusefulinmakingeconomicdecisions--inmakingreasonedchoicesamongalternativecoursesofaction.”

(StatementoftheAccountingPrinciplesBoardNo.4,p.40)AccountingInformationEconomicActivitiesandDecisionMakingAccumu-lateAccountingInformationCommuni-cateExternalUserInternalUserExternalDecisionMakingInternalDecisionMakingCompany’sEconomicActivitiesImpactImpactIntermediateAccounting1TheEnvironmentofFinancialReportingIntermediateAccounting1TheEnvironmentofFinancialReportingInvestorsCommunityBoardofDirectorsManagementEmployeesSuppliersEmployeesCreditorsCustomersAnalystsGovernment

MajorInternalandExternalStakeholderGroupsIntermediateAccounting1TheEnvironmentofFinancialReporting

IntermediateAccounting1TheEnvironmentofFinancialReportingComparisonofFinancialandManagerialAccountingSourcesofAuthority;StatementFormat;DecisionFocus…Couldyouillustratedifferencesbetweenfinancialandmanagerialaccounting?

IntermediateAccounting1TheEnvironmentofFinancialReportingFinancialReporting

Financialreportingistheprocessofcommunicatingfinancialaccountinginformationaboutacompanytoexternalusers.Thebalancesheetreports,asofacertainpointintime,theresourcesofacompany(theassets),thecompany’sobligations(theliabilities),andtheequityoftheowners.

IntermediateAccounting1TheEnvironmentofFinancialReportingFinancialReporting

Financialreportingistheprocessofcommunicatingfinancialaccountinginformationaboutacompanytoexternalusers.Theincomestatementreports,foracertaininterval,thenetassetsgeneratedthroughbusinessoperations(revenues),thenetassetsconsumed(theexpenses),andthenetincome.

IntermediateAccounting1TheEnvironmentofFinancialReportingFinancialReporting

Financialreportingistheprocessofcommunicatingfinancialaccountinginformationaboutacompanytoexternalusers.Thestatementofcashflowsreports,foracertaininterval,theamountofcashgeneratedandconsumedbyacompanythroughoperating,financing,andinvestingactivities.

IntermediateAccounting1TheEnvironmentofFinancialReportingFinancialReporting

Astatementofchangesinstockholders’equityalsoisincludedbymanycompanies.Thisstatementsummarizesthechangesineachitemofstockholders’equityforaperiod.Accountingestimatesandjudgmentsareoutlinedinthenotestofinancialstatements.

IntermediateAccounting1TheEnvironmentofFinancialReportingGenerallyAcceptedAccounting

Principles(GAAP)

GAAParetheguidelines,procedures,andpracticesthatacompanyisrequiredtouseinrecordingandreportingtheaccountinginformationinitsauditedfinancialstatements.

IntermediateAccounting1TheEnvironmentofFinancialReportingHierarchyofSourcesofGAAPLevelAFASBStatementsandInterpretationsAPBOpinionsCAPAccountingResearchBulletinsSECRegulationS-XandFinancialReportingReleasesLevelBFASBTechnicalBulletinsAICPAIndustryAuditandAccountingGuidesAICPAStatements

ofPositionLevelCConsensusPositionsofEITFAICPAPracticeBulletinsLevelDAICPAAccountingInterpretationsFASB“QuestionandAnswer”guidesAICPAAccountingTrendsandTechniquesLevelEOtheraccountingliteratureHigherAuthorityLowerAuthorityABCDECommitteeonAccountingProcedures(CAP)Born: 1939Died: 1959Pronouncements:AccountingResearchBulletins2.ThedevelopmentofaccountingstandardsinU.S.

-CAPIntermediateAccounting1TheEnvironmentofFinancialReportingAccountingPrinciplesBoard(APB)Born: 1959Died: 1973Pronouncements:APBOpinionsIntermediateAccounting1TheEnvironmentofFinancialReporting2.ThedevelopmentofaccountingstandardsinU.S.

-APBFinancialAccountingStandardsBoard(FASB)Born: 1973Died: Pronouncements:StatementsofFinancialAccountingStandardsIntermediateAccounting1TheEnvironmentofFinancialReporting2.ThedevelopmentofaccountingstandardsinU.S.

-FASB

IntermediateAccounting1TheEnvironmentofFinancialReportingStructureoftheFASBFinancialAccountingStandardsAdvisoryCouncil(approximately30members)FinancialAccountingStandardsBoard(7members)Appoint,fund,andoverseeFinancialAccountingFoundation(16-memberboardoftrustees)AdviseContinued

IntermediateAccounting1TheEnvironmentofFinancialReportingStructureoftheFASBFinancialAccountingStandardsBoard(7members)TaskForcesoftheStandardsBoard(includingEmergingIssuesTaskForce)AppointConsultSupportAdministrativeStaffResearchandTechnicalStaffConsult

IntermediateAccounting1TheEnvironmentofFinancialReportingTypesofPronouncementsIssuedbytheFASBStatementsofFinancialAccountingStandardsInterpretationsTechnicalBulletinsStatementsofFinancialAccountingConceptsOtherPronouncements

IntermediateAccounting1TheEnvironmentofFinancialReportingFASBOperatingProceduresIdentifyTopicAppointTaskForceConductResearchIssueDiscussionMemorandumorInvitationtoCommentDeliberateonFindingsHoldPublicHearingsIssueExposureDraftContinued

IntermediateAccounting1TheEnvironmentofFinancialReportingFASBOperatingProceduresFrompreviouspageIssueExposureDraftHoldPublicHearingsModifyExposureDraftsVote(super-majority)IssueStatement

IntermediateAccounting1TheEnvironmentofFinancialReportingFASBAuthoritySources--Overview

AmericanAcct.InstructorsAssociationGov’tRegulatorsSECStateBoardsofPublicAcct.StatementPreparersFinancialExecutivesInstituteIMAIndividualCorpsAuditorsAICPAStatesocietiesofCPAsMajorauditfirmsFASB

IntermediateAccounting1TheEnvironmentofFinancialReporting3. OtherorganizationscurrentlyinfluencingGAAPinU.S.

SecuritiesandExchangeCommission(SEC)AmericanInstituteofCertifiedPublicAccountants(AICPA)FASBEmergingIssuesTaskForce(EITF)CostAccountingStandardsBoard(CASB)InternalRevenueService(IRS)AmericanAccountingAssociation(AAA)Continued

IntermediateAccounting1TheEnvironmentofFinancialReportingInternationalAccountingStandardsCommittee(IASC)/InternationalAccountingStandardsBoard(IASB)GovernmentalAccountingStandardsBoard(GASB)FinancialExecutivesInternational(FEI)InstitutionofManagementAccountants(IMA)AssociationforInvestmentManagementandResearch(AIMR)/CharteredFinancialAnalystInstitute(CFAI)

IntermediateAccounting1TheEnvironmentofFinancialReportingSecuritiesExchangeCommission(1933-present)1929stockmarketcrashblamedonnonstandardaccounting.1933SecuritiesActestablishedSECtostandardizeaccounting.Createdtoprotecttheinterestsofinvestorsbyensuringfullandfairdisclosure.GrantedlegalauthoritytodictateGAAP.HastendedtodefersettingGAAPtotheaccountingprofession.

IntermediateAccounting1TheEnvironmentofFinancialReportingAmericanInstituteofCertifiedPublicAccountantsTheAmericanInstituteofCertifiedPublicAccountants(AICPA)istheprofessionalorganizationofpracticingCPAsintheUnitedStates.

IntermediateAccounting1TheEnvironmentofFinancialReportingAmericanAccountingAssociationTheAmericanAccountingAssociation(AAA)isprimarilyanorganizationforaccountingprofessors.

IntermediateAccounting1TheEnvironmentofFinancialReportingInternalRevenueServiceTheInternalRevenueService(IRS)hastheprimarygoalofequitablecollectingrevenue.

IntermediateAccounting1TheEnvironmentofFinancialReporting4. Ethicsintheaccountingenvironment

Accountantsareoftenfacedwithethicaldilemmas(ethicalconflicts)intheirprofessionalroles.

IntermediateAccounting1TheEnvironmentofFinancialReportingPrinciplesoftheAICPACode

ofProfessionalConductResponsibilitiesIncarryingouttheirresponsibilitiesasprofessionals,membersshouldexercisesensitiveprofessionaljudgmentinalltheiractivities.Continued

IntermediateAccounting1TheEnvironmentofFinancialReportingPrinciplesoftheAICPACode

ofProfessionalConductThePublicInterestMembersshouldaccepttheobligationtoactinawaythatwillservethepublicinterest,honorthepublictrust,anddemonstratecommitmenttoprofessionalism.Continued

IntermediateAccounting1TheEnvironmentofFinancialReportingPrinciplesoftheAICPACode

ofProfessionalConductIntegrityTomaintainandbroadenpublicconfidence,membersshouldperformallprofessionalresponsibilitieswiththehighestsenseofintegrity.Continued

IntermediateAccounting1TheEnvironmentofFinancialReportingPrinciplesoftheAICPACode

ofProfessionalConductObjectivityandIndependenceAmembershouldmaintainobjectivityandbefreefromconflictsofinterestindischargingprofessionalresponsibilities.Amemberinpublicpracticeshouldbeindependentinfactandappearance.Continued

IntermediateAccounting1TheEnvironmentofFinancialReportingPrinciplesoftheAICPACode

ofProfessionalConductDueCareAmembershouldobservetheprofession’stechnicalandethicalstandards,strivecontinuallytoimprovecompetenceandthequalityofservices,anddischargetheprofessionalresponsibilitytothebestofthemember’sability.Continued

IntermediateAccounting1TheEnvironmentofFinancialReportingPrinciplesoftheAICPACode

ofProfessionalConductScopeandNatureofServiceAmemberinpublicpracticeshouldobservethePrinciplesoftheCPCindeterminingthescopeandnatureofservicestobeprovided.

IntermediateAccounting2FinancialReporting:ItsConceptualFramework1.FASBconceptualframework

FASBwasgiventwocharges:

Todevelopaconceptualframeworkofaccountingtheory.Toestablishstandards(GAAP)forfinancialaccountingpractices.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkFunctionsofFASBConceptualFrameworkToguidetheFASBinestablishingaccountingstandards.Toprovideaframeofreferenceforresolvingaccountingquestionsinsituationswhereastandarddoesnotexist.Todeterminetheboundsforjudgmentinthepreparationoffinancialstatements.Continued

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkFunctionsofFASBConceptualFrameworkToincreaseusers’understandingofandconfidenceinfinancialreporting.Toenhancecomparability.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkStatementsofFinancialAccountingConceptsissuedbyFASBConceptsStatementNo.1

ObjectivesofFinancialReportingbyBusinessEnterprises

(IssueDate11/78)

ConceptsStatementNo.2

QualitativeCharacteristicsofAccountingInformation

(IssueDate5/80)

Continued

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkConceptsStatementNo.3

ElementsofFinancialStatementsofBusinessEnterprises

(IssueDate12/80,replacedbyNo.6in1985)

ConceptsStatementNo.4

ObjectivesofFinancialReportingbyNonbusinessOrganizations

(IssueDate12/80)

ContinuedStatementsofFinancialAccountingConceptsissuedbyFASB

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkStatementsofFinancialAccountingConceptsissuedbyFASBConceptsStatementNo.5

RecognitionandMeasurementinFinancialStatementsofBusinessEnterprises

(IssueDate12/84)

ConceptsStatementNo.6

ElementsofFinancialStatements—areplacementofFASBConceptsStatementNo.3(incorporatinganamendmentofFASBConceptsStatementNo.2)

(IssueDate12/85)

Continued

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkConceptsStatementNo.7

UsingCashFlowInformationandPresentValueinAccountingMeasurements

(IssueDate2/00)StatementsofFinancialAccountingConceptsissuedbyFASB

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkRelationshipofConceptualFrameworkandStandard-SettingProcessConceptualFrameworkObjectivesandConceptsTermsIdentifygoalsandpurposeofaccountingGuidetheselectionofeventstobeaccountedfor,themeasurementoftheseevents,andthemeansofsummarizingandcommunicatingtheinformationtoexternalusers,PurposeStatementsofFinancialAccountingConceptsDocumentsContinued

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkRelationshipofConceptualFrameworkandStandard-SettingProcessStandardSettingFromObjectivesandConceptsStandardsEstablishmethodsandproceduresformeasuring,summarizing,andcommunicatingfinancialaccountinginformationtoexternalusers.StatementsofFinancialAccountingConceptsStatementsofFinancialAccountingStandards

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkConceptualFrameworkOverviewObjectivesofFinancialReportingQualitativeCharacteristicsofAccountingInformationElementsofFinancialStatements

RecognitionandMeasurementConceptsAssumptionsPrinciplesConstraints

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkObjectivesofFinancialReporting—broadobjectivesFinancialreportingshouldprovideinformationthatisusefultopresentandpotentialinvestorsandcreditorsandotherusersinmakingrationalinvestment,credit,andsimilardecisions.Usefulness

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkObjectivesofFinancialReportingFinancialreportingshouldprovideinformationthatisunderstandabletoonewhohasareasonableknowledgeofaccountingandbusinessandwhoiswillingtostudyandanalyzetheinformationpresented.Understandability

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkObjectivesofFinancialReportingWhiletherearemanypotentialusersoffinancialreports,theobjectivesaredirectedprimarilytowardinvestorsandcreditors.TargetAudience

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkObjectivesofFinancialReporting—specificobjectivesFinancialreportingshouldprovideinformationthatisusefulinassessingamounts,timing,anduncertainty(risk)ofprospectivecashflows.AssessingFutureCashFlows

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkObjectivesofFinancialReporting—specificobjectivesFinancialreportingshouldalsoprovideinformationaboutanenterprise’sassets,liabilities,andowners’equitytohelpinvestors,creditors,andothersevaluatethefinancialstrengthsandweaknessesoftheenterpriseanditsliquidityandsolvency.EvaluatingEconomicResources

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkObjectivesofFinancialReporting—specificobjectivesInformationaboutenterpriseearnings,measuredbyaccrualaccounting,generallyprovidesabetterbasisforforecastingfutureperformancethandoesinformationaboutcurrentcashreceiptsanddisbursements.PrimaryFocusonEarningsReturnoninvestmentprovidesameasureofoverallcompanyperformance.Riskistheuncertaintyofunpredictabilityofthefutureresultsofacompany.Financialflexibilityistheabilityofacompanytotakeeffectiveactionstochangetheamountsandtimingofcashflows.TypesofusefulinformationIntermediateAccounting2FinancialReporting:ItsConceptualFrameworkContinuedLiquidityisthetermusedtodescribehowquicklyanassetcanbeconvertedintocashoraliabilitypaid.Operatingcapabilityreferstotheabilityofacompanytomaintainagivenphysicallevelofoperation.TypesofusefulinformationIntermediateAccounting2FinancialReporting:ItsConceptualFramework

IntermediateAccounting2FinancialReporting:ItsConceptualFramework3.QualitativecharacteristicsofaccountinginformationFASBStatementofFinancialAccountingConceptsNo.2specifiesqualitativecharacteristicsofaccountinginformationthataccountinginformationshouldpossessinordertobemostuseful.DifferentfromChina,FASBhassethierarchyofqualitativecharacteristics.RelevanceReliabilityHierarchyofQualitativeCharacteristicsAccountingInformationBenefits>CostsUnderstandabilityDecisionUsefulnessPervasiveConstraintUser-SpecificQualityPrimaryDecision-SpecificQualitiesContinuedOverallQualityIntermediateAccounting2FinancialReporting:ItsConceptualFrameworkIngredientsofPrimaryQualitiesRelevanceReliabilityHierarchyofQualitativeCharacteristicsPredictiveValueFeedbackValueTimeli-nessVerifi-abilityRepresenta-tionalfaithfulnessNeu-tralitySecondaryandInteractiveQualitiesMaterialityComparability(includingConsistencyThresholdforRecognitionIntermediateAccounting2FinancialReporting:ItsConceptualFrameworkRelevance:makingadifferenceIntermediateAccounting2FinancialReporting:ItsConceptualFrameworkPredictiveValue

Helpsadecisionmakerpredictfutureconsequencesbasedoninformationaboutpasttransactionsandevents.FeedbackValue

Helpstoconfirmorchangeadecisionmaker’sbeliefsbasedonwhethertheinformationmatcheswhatwasexpected.Timeliness

Qualityofinformationthatisprovidedonatimelybasis.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkReliabilityVerifiability

Reportedinformation

shouldbebasedonobjectivelydeterminedfactsthatcanbeverifiedbyotheraccountantsusingthesamemeasurementmethods.RepresentationalFaithfulness

Theamountsanddescriptionsreportedinthefinancialstatementsshouldreflecttheactualresultsofeconomictransactionsandevents.

Neutrality

Theinformationshouldbepresentedinanunbiasedmanner;fairness.Freefromerrorandrepresentswhatitclaimstorepresent.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkComparabilityComparabilityrequiresthatsimilareventsbeaccountedforinthesamemanneronthefinancialstatementsof(1)differentcompaniesand(2)foraparticularcompanyfordifferentperiods(consistency).

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkMaterialityIstheitemlargeenoughtoinfluencethedecisionofauseroftheinformation?

IntermediateAccounting2FinancialReporting:ItsConceptualFramework4.AccountingassumptionsandconventionsCertainassumptionsandconventionshaveinfluencedthedevelopmentofgenerallyacceptedaccountingprinciples.ThesearesimilarwiththoseofChina.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkEntityTheentityassumptionassumesthataproprietorship,partnership,orcorporation’sfinancialactivitiesaredistinguishedfromotherfinancialorganizationsinkeepingitsownfinancialrecordsandreports.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkContinuityThisassumptionassumesthatthecompanywillcontinuetooperateinthenearfuture,unlesssubstantialevidencetothecontraryexists.Thisassumptionisalsoknownasthegoing-concernassumption.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkPeriodofTimeInaccordancewiththeperiod-of-timeassumption,acompanypreparesfinancialstatementsattheendofeachyearandincludesthemitsannualreport.Theperiod-of-timeassumptionisthebasisfortheadjustingentryprocessatperiod-end.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkMonetaryUnitThisassumptionstatesthattheremustbesomebasisformeasuringexchangeofgoodsorservices.Currentlythedollarisconsideredtobeastablemonetaryunitforpreparingacompany’sfinancialstatements.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkHistoricalCostUsually,theexchangepriceisretainedintheaccountingrecordsasthevalueofanitemuntilitisremovedfromtherecords.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkRealizationandRecognitionRealization

istheprocessofconvertingnoncashresourcesandrightsintocashorrightstocash.Recognition

istheprocessofformallyrecordingandreportinganiteminthefinancialstatementsofacompany.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkMatchingandAccrualAccountingThematching

principlestatesthattodeterminetheincomeofacompanyforanaccountingperiod,thecompanycomputesthetotalexpenseinvolvedinobtainingtherevenuesoftheperiodandrelatesthesetotalexpensestothetotalrevenuesrecordedintheperiod.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkConservatismTheconservatism

conventionstatesthatwhenalternativeaccountingvaluationsareequallypossible,theaccountantshouldselecttheonethatisleastlikelytooverstateassetsandincomeinthecurrentperiod.

IntermediateAccounting2FinancialReporting:ItsConceptualFramework5.Elementsoffinancialstatements

Mainfinancialstatements:BalanceSheetIncomestatementStatementofCashFlowsStatementofChangesinEquity

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkElementsofabalancesheetAssetsaretheprobablefutureeconomicbenefitsobtainedandcontrolledbyacompanyasaresultofpasttransactionsorevents.Liabilities

aretheprobablefuturesacrificesofeconomicbenefitsarisingfrompresentobligationsofacompanytotransferassetsorprovideservicesinthefutureasaresultofpasttransactionsorevents.Equity

istheowners’residualinterestinthenetassetsofacompany.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkElementsofIncomeStatementRevenues

areinflowsorotherenhancementsofassetsofacompanyorsettlementofitsliabilitiesduringaperiodfromdeliveringorproducinggoods,renderingservices,orotheractivitiesthatarethecompany’songoingmajoroperation.Revenuesincreasetheequityofacompany.Continued

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkElementsofIncomeStatement

Expensesareoutflowsorotherusingupofassetsofacompanyorincurrenceofliabilitiesduringaperiodfromdeliveringorproducinggoods,renderingservices,orcarryingoutotheractivitiesthatarethecompany’songoingmajoroperation.Expensesdecreasetheequityofacompany.Continued

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkElementsofIncomeStatement

Gains

areincreasesintheequityofacompanyfromperipheralorincidentaltransactionsandfromallothertransactionsandothereventsandcircumstancesaffectingthecompany,exceptthosethatresultfromrevenuesorinvestmentsbyowners.Gainsincreasetheequityofacompany.Continued

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkElementsofIncomeStatement

Losses

aredecreasesintheequityofacompany,fromperipheralorincidentaltransactionsexceptthosethatresultfromexpensesordistributiontoowners.Lossesdecreasetheequityofacompany.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkElementsofStatementofCashFlowsOperatingcashflowsaretheflowsofcashfromacquiring,selling,anddeliveringgoodsforsale,aswellasprovidingservices.Investingcashflows

aretheflowsofcashfromacquiringandsellinginvestments,property,plant,andequipment,aswellasfromlendingmoneyandcollectingonloans.Financingcashflows

aretheflowsofcashtoandfromtheownersandlong-termcreditors.

IntermediateAccounting2FinancialReporting:ItsConceptualFrameworkElementsofStatementofChangesinEquityInvestmentsbyowners

areincreasesinequityresultingfromtransfersofsomethingvaluabletothecompanyfromotherentitiesinordertoobtainorincreaseownershipinterest.Distributiontoowners

aredecreasesinequityofacompanycausedbytransferringassets,renderingservices,orincurringliabilitiestoowners.BalanceSheet12/31/X0Cash $80,000Other 4,550,000Total $4,630,000Liabilities$2,970,000Stock900,000R/E760,000Total$4,630,000Statement

ofCashFlowsCashFromOp$973,000CashFromInv(1,188,000)CashFromFin245,000NetIncrease$30,000Beg.Cash80,000End.Cash$110,000StatementofRetainedEarningsR/E12/31/X0$760,000NetIncome864,600Dividends(400,000)R/E12/31/X1$1,224,600Revenues $12,443,000Expenses11,578,400NetIncome$864,600IncomeStatementCash $110,000Other 4,975,000Total $5,085,000Liabilities$2,860,400Stock1,000,000R/E1,224,600Total