Question

Bennett Griffin and Chula Garza organized Cole Valley Book Store as a corporation; each contributed $80,000 cash to start the business and received 4,000 shares of common stock. The store completed its first year of operations on December 31, current year. On that date, the following financial items for the year were determined: December 31, current year, cash on hand and in the bank, $75,600; December 31, current year, amounts due from customers from sales of books, $39,000; unused portion of store and office equipment, $73,000; December 31, current year, amounts owed to publishers for books purchased, $12,000; one-year note payable to a local bank for $3,000. No dividends were declared or paid to the stockholders during the year.
Required:
Complete the following balance sheet as of the end of the current year. 2.
What was the amount of net income for the year?
(Hint: Use the retained earnings equation [Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings] to solve for net income.)
Assets Liabilities Accounts payable Note payable Interest payable Cash Accounts receivable Store and office equipment 300 Total liabilities Stockholders' Equity Common stock Retained earnings 12,300 Total stockholders’ equity Total liabilities and stockholders' equity Total assets $

Answer 1

Answer:

Cole Valley Book Store Corporation

1. Cole Valley Book Store Corporation

Balance Sheet as of December 31:

Assets:

Cash                           $75,600

Accounts receivable $39,000

Equipment, net         $73,000

Total Assets            $187,600

Liabilities + Equity:

Accounts Payable    $12,000

Notes Payable           $3,000

Common Stock      $160,000

Retained Earnings   $12,600

2. Amount of net income for the year:

Earnings + Net Income - Dividends = Ending Retained Earnings

0 + Net Income - 0 = $12,600

Net Income = $12,600

Explanation:

Data and Calculations:

cash on hand and in the bank, $75,600;

amounts due from customers from sales of books, $39,000;

unused portion of store and office equipment, $73,000

amounts owed to publishers for books purchased, $12,000;

one-year note payable to a local bank for $3,000

Common Stock $160,000 (80,000 x 2)

Share capital = 8,000 shares (4,000 x 2)

b) Retained Earnings = Assets minus (Liabilities + Capital)

= $187,600 - $15,000 - $160,000

= $12,600