Question

STOCHOS INC.      

STATEMENT of FINANCIAL POISTION                            

June 30, 2018

ASSETS                                                      LIABILITIES

Cash                               $222,000             Accounts Payable                $150,000

Accounts Rec.                     58,000             Mortgage Payable                  500,000

Inventory                              4,000           

Supplies                                 6,000              TOTAL LIABILITIES                    $650,000                           

Land                                  210,000

Buildings      $900,000                                STOCKHOLDER EQUITY

    Acc. Depr. <200,000> 700,000        

Equipment        260,000                             Common Stock $5 Par       $500,000

    Acc. Depr    <60,000> 200,000              Excess                                 $100,000

                                                                     Retained Earnings               $150,000

                                                                     TOTAL EQUITY                            $750,000            

TOTAL ASSETS      $1,400,000            TOTAL LIAB. & EQUITY         $1,400,000

July 1 Sold 220,000 shares of common stock for $6,600,000.

July 3 Purchased on account $100,000 of inventory for resale to customers.

July 5   Purchased a 2-year insurance policy for $4,800 in cash. Effective date is July 1.

July 7   Paid cash for $100,000 in inventory acquired July 3.

July 10 Sales revenue generated was $400,000. Cash received this date was $75,000 the

             balance would be received later in the year.

July 30 Paid $40,000 in wages for the month of July.

   

July 30 Acquired $800,000 of equipment. Useful life is 10 years. Signed a note (12%)

             for the full amount.

July 31 Paid $20,000 July monthly mortgage payment. The rate of interest on this

             mortgage is 7 per cent.

Aug. 1 Stochos declared a dividend of $1 per share. Shareholders who owned shares on

           August 15 would be paid the dividends in October.

Aug. 9 Stochos borrowed $180,000, and signed a note for this amount at 11 per cent.

Aug. 15 Customers returned $80,000 of items they acquired on July 10.

Aug. 18 Stochos sold 100,000 shares for $80 per share.

Aug. 30 Paid August wages – the $40,000 was paid in cash.

Aug. 31 Paid the August mortgage payment of $20,000.

Aug. 30 Paid $30,000 on the equipment note entered into on July 30 of this year.

Aug. 30 Received full amount due from the July 10 sale.

Sept. 30 Supply inventory valued at $200.

Sept. 30 Sales on account to customers amounted to $135,000. Stochos Inc. received

                $33,000 in cash on this date from customers.

Sept. 30 Wages were accrued this day in the amount of $40,000. Stochos Inc. informed

               their employee that their checks would be available October 5^th.

OTHER INFORMATION

1. Tax rate is 20%.

2. Building has a 20-year useful life from date of purchase.

3. All equipment has a useful life of ten years.

4. Inventory at the end of the quarter was $10,000.

PREPARE THE FOLLOWING:

1. INCOME STATEMENT

2. STATEMENT OF RETAINED EARNINGS

3. STATEMENT OF FINANCIAL POSTION [AKA] BALANCE SHEET

Answer 1

1.

Stochos Inc.    Income Statement For the period ended September 30, 2018
	$	$
Sales Revenue		488,000
Cost of Goods Sold		94,000
Gross Profit		394,000
Operating Expenses
Wages Expense	120,000
Supplies Expense	5,800
Insurance Expense	600
Depreciation Expense: Building	11,250
Depreciation Expense: Equipment	19,833
Interest Expense	27,091
Total Operating Expenses		184,574
Earnings before Taxes		209,426
Income Tax Expense ( 20% )		41,885
Net Income		167,541

2.

Stochos Inc.    Statement of Retained Earnings    For the period ended September 30, 2018
Balance, July 1	$ 150,000
Add: Net Income	167,541
Less: Cash Dividends	(320,000)
Balance, September 30	$ (2,459)

3.

Stochos Inc. Balance Sheet    September 30, 2018
Assets	$	$	Liabilities and Stockholders' Equity	$	$
Cash	15,100,200		Accounts Payable	150,000
Accounts Receivable	193,000		Wages Payable	40,000
Inventory	10,000		Income Taxes Payable	41,885
Supplies	200		Dividends Payable	320,000
Prepaid Insurance	4,200		Interest Payable	13,357
Total Current Assets		15,307,600	Total Current Liabilities		565,242
Land	210,000		Mortgage Payable		465,734
Buildings,net	688,750		12 % Note Payable		778,000
Equipment,net	980,167		11% Note Payable		180,000
Total Fixed Assets		1,878,917	Total Liabilities		1,988,976
			Common Stock	2,100,000
			Excess	13,100,000
			Retained Earnings	(2,459)
			Total Stockholders' Equity		15,197,541
Total Assets		17,186,517	Total Liabilities and Stockholders' Equity		17,186,517

Workings:

Mortgage Amortization Schedule:

Month	Amount Paid / Payable	Interest Expense	Principal Repaid	Carrying Value of Mortgage Payable
				$ 500,000
July	$ 20,000	2,917	17,083	482,917
August	20,000	2,817	17,183	465,734
September	20,000	2,717	17,283	448,451
		8,451

Amortization Schedule: Note Payable ( 12 % )

Month	Amount Paid / Payable	Interest Expense	Principal Repaid	Carrying Value
July				$ 800,000
August	$ 30,000	8,000	22,000	778,000
September	$ 30,000	7,780	22,220	755,780
		15,780

Interest expense on the 11 % note payable = $ 180,000 x 11 % x 52 / 360 = $ 2,860