You received the following statement for 2009 for your savings account at a bank. Cash balances in

Question:

You received the following statement for 2009 for your savings account at a bank. Cash balances in the account earn interest at a 5 percent rate per annum.

Balance, January 1, 2009 ...........$100

Earnings at an interest rate of 5% p.a..... 5

Withdrawals ................ (5)

Balance, December 31, 2009 ........ 100

This statement is effectively a statement of owner's equity for the account. It shows your starting balance, adds your earnings for the year, and subtracts your dividend (the withdrawal), to yield a closing balance.

a. Prepare an income statement, balance sheet, and cash flow statement for this account for 2009.

b. Rather than withdrawing $5 from the account, suppose you left it in the account. What would your financial statements for 2009 then look like?

c. If, before the end of the year, you instructed your bank to invest the earnings of $5 in a mutual fund (and there were no withdrawals), what would the final financial statements look like?


Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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