Milea Inc. experienced the following events in Year 1, its first year of operations: 1. Received $13,500 cash from the issue of common stock
2. Performed services on account for $45,000
3. Pald the utility expense of $1,150.
4. Collected $36,540 of the accounts receivable.
5. Recorded $8,100 of accrued salaries at the end of the year
6. Paid a $1,050 cash dividend to the stockholders.
Required
1. Prepare the income statement
2. Prepare the statement of changes in stockholders' equity
3. Prepare the balance sheet as of December 31.
4. Prepare the statement of cash flows for the Year 1 accounting period.

1. Net income = $35,750

2. Stockholders' equity = $48,200

3. Total assets = Total Equity and Liabilities = $56,300

4. Net cash generated = $47,840

Explanation:

1. Prepare the income statement

Milea Inc.

Income Statement

For the Year ended 31 December Year 1

Details                                         Amount ($)  

Revenue:

Service income                             45,000

Expenses:

Utility expense                                (1,150)

Accrued salaries                             (8,100)

Net income                                    35,750

Dividend paid                                 (1,050)                          

Retained earnings                        34,700  

2. Prepare the statement of changes in stockholders' equity

Milea Inc.

Statement of changes in stockholders' equity

For the Year ended 31 December Year 1

Details                                         Amount ($)  

Common stock                             13,500

Retained earnings                        34,700  

Stockholders' equity                   48,200  

3. Prepare the balance sheet as of December 31.

Milea Inc.

Balance Sheet

As of 31 December Year 1

Details                                                                         $               

Assets

Current Assets

Ending cash balance                                             47,840

Accounts receivable ($45,000 - $36,540)            8,460  

Total assets                                                            56,300  

Equity and Liabilities

Stockholders' equity                                              48,200  

Liabilities

Current liabilities

Accrued salaries                                                     8,100  

Total Equity and Liabilities                                  56,300  

4. Prepare the statement of cash flows for the Year 1 accounting period.

Milea Inc.

Statement of Cash Flows

For the Year ended 31 December Year 1

Details                                                                  $                      $         

Net income                                                                             35,750

Adjustment to reconcile net income:

(Increase) decrease in current assets:

Accounts receivable ($45,000 - $36,540)                           (8,460)

Increase (decrease) in current liabilities:

Accrued salaries                                                                      8,100  

Net cash from operating activities                                       35,390

Cash flow from financing activities:

Common stock                                               13,500

Dividend paid                                                 (1,050)  

Net cash from financing activities                                        12,450  

Net cash generated                                                              47,840

Beginning cash balance                                                             0        

Ending cash balance                                                            47,840  

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