Anonymous

Given the following transactions for ABC Company for 2010:

1) The owners started the business as a corporation by contributing \$50,000 cash

2) ABC purchased office equipment for \$5,000 cash and land for \$15,000 cash

3) ABC earned a total of \$32,000 of revenue, of which \$20,000 was collected in cash

4) ABC purchased \$550 worth of supplies for cash

5) ABC paid \$6,000 in cash for other operating expense

6) At the end of the year, ABC owed employees \$3,600 for work that the employees had done in 2010. The next payday, however, is not until January 4, 2011

7) Only \$120 worth of supplies was left at the end of the year.

Office equipment was purchased on January 1 and is expected to last for 5 years (straight-line amortization, no salvage value)

Required: Prepare the income statement for the year ended December 31, 2010, and the balance sheet at December 31, 2010.

Can you show me your calculations? thank you!

Relevance
• 9 years ago

I'm assuming accrual accounting, correct?

Income Statement

Revenue - 32,000 >> given

Cost of goods sold - (430) >> \$550 supplies (inventory?) - \$120 left at end

-------------------------------------------

Gross profit - 31,570 >> \$32,000 revenue - \$430 COGS

Operating expense - (6,000) >> given

Depreciation expense - (1,000) >> \$5,000 basis / 5 years = \$1,000 year depreciation

Salaries expense - (3,600)

-------------------------------------------

Net income - 20,970 >> \$31,570 gross profit - \$6,000 - \$1,000 - \$3,600

Balance Sheet

ASSETS

Cash - 43,450 >> (see below)

Accounts receivable - 12,000 >> \$32,000 revenue - \$20,000 collected

Supplies/Inventory - 120 >> given

Office equipment - 5,000 >> given

Accumulated depreciation - (1,000) >> sum of all years' depreciation, which is only this year's so far.

Land - 15,000 >> remember, land is not depreciated

-----------------------------------------------

Total Assets - 74,570

LIABILITIES & EQUITY

Salaries payable - 3,600 >> only accrued, not yet paid

-----------------------------------------------

Total Liabilities - 3,600

Paid in capital - 50,000 >> given

Retained earnings - 20,970 >> see net income on income statement

----------------------------------------------

Total Equity - 70,970

Total Liabilities and Equity - 74,570

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Assets = \$74,570

Liabilities & equity = \$74,570

They match so we did everything correctly.

Now here's how I got the cash balance:

Cash: 50,000 contribution + 20,000 (cash received in revenue) - 5,000 (paid for equip.) - 15,000 (paid for land) - 550 (paid for supplies) - 6,000 (paid for other expenses) = \$43,450

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Kinda sloppy, but you should be able to make out how everything was done.