Answer and Explanation:
a. The computation of the total current asset is shown below
= Account receivable + cash + supplies + merchandise inventory
= $33,000 + $9,000 + $6,000 + $31,000
= $79,000
b The total liabilities and owners equity is
= Account payable + long term debt + common stock + retained earnings
= $23,000 + $40,000 + $10,000 + $59,000
= $132,000
c. The earnings from operations is
Sales revenue $140,000
Less cost of goods sold $90,000
Gross profit $50,000
add: service revenue $20,000
Less depreciation expense $12,000
Less supplies expense $14,000
Operating income $44,000
d. The net income is
= operating income - interest expense - income tax expense
= $44,000 - $4,000 - $12,000
= $28,000
e. The average income tax rate is
= $12,000 ÷ $40,000 × 100
= 30%
f. The beginning retained earnings is
= $59,000 + $16,000 - $28,000
= $47,000
