Question

In: Accounting

Sage Inc. experienced the following transactions for 2018, its first year of operations: Issued common stock...

Sage Inc. experienced the following transactions for 2018, its first year of operations:

  1. Issued common stock for $110,000 cash.
  2. Purchased $205,000 of merchandise on account.
  3. Sold merchandise that cost $164,000 for $326,000 on account.
  4. Collected $292,000 cash from accounts receivable.
  5. Paid $185,000 on accounts payable.
  6. Paid $54,000 of salaries expense for the year.
  7. Paid other operating expenses of $70,000.
  8. Sage adjusted the accounts using the following information from an accounts receivable aging schedule:
Number of Days Past Due Amount Percent Likely to Be Uncollectible Allowance Balance
Current $ 20,400 0.01
0–30 8,500 0.05
31–60 1,700 0.10
61–90 1,700 0.20
Over 90 days 1,700 0.50

b. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Sage Inc. for 2018.

SAGE INC.
Balance Sheet
As of the End of the Year 2018
Assets
not attempted not attempted
not attempted not attempted
not attempted not attempted 0
not attempted not attempted
Total assets $0
Liabilities
not attempted not attempted
not attempted not attempted
Total liabilities 0
Stockholders’ equity
not attempted not attempted
not attempted not attempted
not attempted not attempted
Total stockholders’ equity 0
Total liabilities and stockholders’ equity $0
SAGE INC.
Statement of Cash Flows
For the Year Ended 2018
Cash flows from operating activities:
not attempted not attempted
not attempted not attempted
not attempted not attempted
not attempted not attempted
Net cash flow from operating activities $0
Cash flows from investing activities not attempted
Cash flows from financing activities
not attempted not attempted
not attempted not attempted
Net cash flows from financing activities 0
Net change in cash 0
not attempted not attempted
Ending cash balance $0
  1. What is the net realizable value of the accounts receivable at December 31, 2018?
Net realizable value   

Solutions

Expert Solution

a.) Number of Days Past Due Amount $ Percent Likely to Be Uncollectible Allowance Balance $
Current 20,400 0.01 204
0–30 8,500 0.05 425
31–60 1,700 0.1 170
61–90 1,700 0.2 340
Over 90 days 1,700 0.5 850
Total 34,000 1,989
b.) SAGE INC.
Income Statement Amount $
Sales 326,000
Less: Cost of goods sold 164,000
Gross Profit 162,000
Less: Salaries Expense       54,000
Less: Bad Debt Expense         1,989
Less: Other operating expenses       70,000
Net Profit      36,011
SAGE INC.
Statement of Change in Stockholders' Equity
Common Stock Retained earnings Total $
On January 1,2018               -                             -                                       -  
Add: Net Profit               -                     36,011                            36,011
Add: Issued during 2018 110,000                           -                           110,000
On December 31,2018 110,000                  36,011                         146,011
SAGE INC.
Balance Sheet
As of the End of the Year 2018 Amount $
Assets
Cash( 110,000 + 292,000 - 185,000 - 54,000 - 70,000 )     93,000
Accounts Receivable (net of allowance )     32,011
(326,000 - 292,000 - 1,989 )
Merchandise Inventory (205,000 - 164,000 )     41,000
Total assets 166,011
Liabilities
Accounts Payable     20,000
(205,000 - 185,000 )
Total liabilities     20,000
Stockholders’ equity
Common Stock 110,000
Retained earnings     36,011
Total stockholders’ equity 146,011
Total liabilities and stockholders’ equity 166,011
SAGE INC.
Statement of Cash Flows
For the Year Ended 2018 Amount $

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