The following selected accounts and account balances were taken from the records of Nowell Company. Except as

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The following selected accounts and account balances were taken from the records of Nowell Company. Except as otherwise indicated, all balances are as of December 31, 2018, before the closing Entries were recorded.

Consulting revenue........................................................................$18,200

Cash...................................................................................................35,600

Cash received from common stock issued during 2017..............6,000

Travel expense....................................................................................2,100

Dividends.............................................................................................4,000

Cash flow from investing activities...................................................5,200

Rent expense.....................................................................................3,500

Payment to reduce debt principal..................................................10,000

Retained earnings, January 1, 2018...............................................16,200

Salary expense..................................................................................7,200

Cash flow from operating activities..................................................2,600

Common stock, December 31, 2018.............................................16,000

Other operating expenses................................................................2,300

Required

a. Prepare the income statement Nowell would include in its 2018 annual report.

b. Identify the accounts that should be closed to the Retained Earnings account.

c. Determine the Retained Earnings account balance at December 31, 2018. Identify the reasons for the difference between net income and the ending balance in Retained Earnings.

d. What are the balances in the Revenue, Expense, and Dividend accounts on January 1, 2019? Explain.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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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Survey of Accounting

ISBN: 978-1259631122

5th edition

Authors: Thomas Edmonds, Christopher Edmonds, Philip Olds, Frances McNair, Bor Yi Tsay

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