Question

Use the following information to answer the next six questions:

All balances are as of 12/31/2019 unless specified otherwise.

Loss on the Sale of Equipment	62,250	Income Tax Expense	48,750
Short Term Investments	1,500	Inventory	97,500
Retained Earnings, 1/1/19	281,000	Gain on Sale of Equipment	27,500
Goodwill	50,000	Cost of Goods Sold	204,000
Common Stock	???	Notes Payable 5/1/20	12,500
Cash	70,000	Sales Revenue	447,500
Accumulated Depreciation	50,000	Dividends	10,000
Notes Payable, due 12/31/21	104,500	Prepaid Expenses	2,500
Furniture	83,000	Accrued Expenses	28,000
Equipment	372,500	Accounts Receivable	42,000
Operating Expenses	43,000	Accounts Payable	36,000

5. Determine the Working Capital as of December 31, 2019.

1. 137,000
2. 5.9305
3. 187,500
4. 149,500
5. cannot be determined since the balance of Common Stock is not given

6. Determine Retained Earnings and Cash as of 12/31/2019.

	Retained Earnings		Cash
A.	$398,000		$70,000
B.	$281,000		$80,000
C.	$422,750		$517,500
D.	$388,000		$70,000
E.	$436,750		$80,000

7. Determine Total Liabilities as of 12/31/2019.

1. $48,500
2. $76,500
3. $153,000
4. $168,500
5. $181,000

8. Determine Income from Operations for 2019.

1. $200,500
2. $243,500
3. $117,000
4. $151,750
5. $165,750

9. Determine the Total Assets as of 12/31/2019.

1. $719,000
2. $769,000
3. $679,000
4. $669,000
5. $696,500

10. Determine the Profit Margin for the year ended December 31, 2019.              

1. 26%
2. 37%
3. 54%
4. 382%
5. $243,500

Answer 1

Income statement
Sales Revenue		447,500
Cost of Goods Sold		204,000
Gross profit		243,500
Operating Expenses		43,000
Income from operations		200,500
Loss on the Sale of Equipment	-62,250
Gain on Sale of Equipment	27,500	-34,750
Income before taxes		165,750
Income Tax Expense		48,750
Net income		117,000
Statement of retained earnings
Retained Earnings, 1/1/19		281,000
Add: Net income		117,000
Less: Dividends		-10,000
Retained Earnings, 31/12/19		388,000
Balance sheet
Assets
Current assets
Cash	70,000
Short Term Investments	1500
Accounts Receivable	42,000
Inventory	97,500
Prepaid Expenses	2,500
Total current assets		213,500
Non-current assets
Furniture	83,000
Equipment	372,500
Accumulated Depreciation	-50,000
Net property plant equipment		405,500
Goodwill		50,000
Total assets		669,000
Current liabilities
Accounts Payable	36,000
Accrued Expenses	28,000
Notes Payable 5/1/20	12,500
Total current liabilities		76,500
Long term liability
Notes Payable, due 12/31/21		104,500
Total liabilities		181,000
Equity
Common stock ((669000-181000)-388000))	100,000
Retained earnings	388,000
Total equity		488,000
Total liabilities & equity		669,000

Answer 5
Total current assets		213,500
Less: Total current liabilities		76,500
Working Capital as of December 31, 2019		137,000
Correct option is A		A
Answer 6
Retained Earnings		388,000
Cash		70,000
Correct option is D		D
Answer 7
Total Liabilities as of 12/31/2019		181,000
Correct option is E		E
Answer 8
Income from Operations for 2019		200,500
Correct option is A		A
Answer 9
Total Assets as of 12/31/2019		669,000
Correct option is D		D
Answer 10
Net income		117,000
Divided by: Sales Revenue		447,500
Profit Margin		26%
Correct option is A		A