Question

1) Prepare an ending 2015 Income Statement and Balance Sheet from the following information: Sales $800,000; Cost of Goods Sold $300,000; Accounts Receivables $20,000; Bonds Outstanding $160,000; Accounts Payable $20,000; Advertising Expense $1,000; Administrative Expenses $35,000; Interest Expense $24,000; Depreciation Expense $40,000; Dividends Paid $137,000; Rent Expense $5,000; Accruals $20,000; Common Stock $100,000; Retained Earnings $245,000 (Beginning 0f 2015); Cash $20,000; Inventory $45,000; Net Fixed Assets $600,000 (Beginning of 2015). (Assume a 40% Tax Rate)

Answer 1

Answer:

Ending retained earning for 2015 = $345,000

Total Assets = $645,000 

Shareholder's equity = $445,000

Total liabilities = $200,000

Explanation:

a. Income Statement for the year ended 2015

Details                                                                        $      

Sales                                                                      800,000

Cost of Goods Sold                                              300,000

Gross profit                                                           500,000

Advertising Expense                                               (1,000)

Administrative Expenses                                      (35,000)

Depreciation Expense                                          (40,000)

Rent Expense                                                         (5,000)

Operating income                                                 419,000

Interest Expense                                                  (24,000)

Income before tax                                                395,000

Taxation (40% * $395,000)                                 (158,000)

Net income                                                            237,000

Dividend paid                                                       (137,000)

Retained earning for the year                              100,000

Beginning retained earning                                 245,000

Ending retained earning                                     345,000  

a. Balance sheet as at the year ended 2015

Details                                                $                     $        

Assets:

Beginning Net Fixed Assets     600,000

Depreciation                               40,000

Ending Net Fixed Assets                                     560,000

Current Assets:

Cash                                                                        20,000

Accounts Receivables                                           20,000

Inventory                                                                45,000

Total Assets                                                          645,000

Shareholder's Fund:

Common Stock                                                     100,000

Ending retained earning                                     345,000

Shareholder's equity                                            445,000

Bonds Outstanding                 160,000

Accounts Payable                    20,000

Accruals                                   20,000

Total liabilities                                                       200,000

Total equities and Liabilities                               645,000