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

Ending retained earning for 2015 = $345,000

Total Assets = $645,000

Shareholder's equity = $445,000

Total liabilities = $200,000

Step-by-step 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