In: Accounting
Three financial statements, the balance sheet, income statement, and statement of retained earnings for XYZ, Inc., an accounting and consulting firm, are included below.
XYZ, Inc. |
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Balance Sheet |
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As of December 31, 2018 |
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Assets: |
Liabilities and Shareholder's Equity: |
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Cash |
$12,000 |
Accounts payable |
$2,000 |
|
Accounts receivable |
22,000 |
Salaries payable |
6,000 |
|
Supplies |
7,000 |
Utilities payable |
1,000 |
|
Land |
18,000 |
Notes payable |
25,000 |
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Equipment (net) |
30,000 |
Common stock |
42,000 |
|
Retained earnings |
13,000 |
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Total assets |
$89,000 |
Total liabilities & stockholder's equity |
$89,000 |
XYZ, Inc. |
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Income Statement |
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For Year Ended December 31, 2018 |
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Consulting revenue |
$150,000 |
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Salaries expense |
(90,000) |
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Marketing expense |
(24,000) |
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Administrative expense |
(22,000) |
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Net Income |
$14,000 |
XYZ, Inc. |
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Statement of Retained Earnings |
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For Year Ended December 31, 2018 |
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Beginning balance |
$0 |
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Plus: Net income |
14,000 |
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Less: Dividends |
(1,000) |
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Ending balance |
$13,000 |
During January 2019, XYZ engaged in these transactions:
(1) Paid in full with cash the December 31 balance of accounts payable.
Required:
Prepare a "classified" balance sheet as of January 31, 2019. As appropriate, a "classified" balance sheet separates assets into 1) current assets, 2) investments, 3) property, plant, & equipment, 4) intangible assets, and 5) other assets, and separates liabilities into 1) current liabilities and 2) long-term liabilities.
a) Adjustments have been shown using version of the financial statement effects template.
Working Note 1
Supplies purchased to be adjusted in (4) can be computed using the following formula:
Given:
Opening balance = $7000
Expenses = $5100
Closing balance = $4000
Expense = Opening balance + Purchases - Closing balance
$5100 = $7000 + Purchases - $4000
$5100 = $3000 + Purchases
Purchases = $5100 - $3000 = $2100
Working Note 2
Interest on notes payable for (5) transaction can be computed as:
Given:
Principal amount = $25000
Interest rate = 12% p.a.
Working Note 3
Depreciation to be adjusted in (10) transaction can be computed as:
Cost = $40000
Book value = $30000
It has been depreciated over 6 years using straightline depreciation. So,
(b) Multi-step income statement has been prepared below:
Statement of retained earnings has been prepared below:
Cash flow statement has been prepared below:
Classified balance sheet has been prepared below: