Question

ASTRO Inc.

Statement of Financial Position

December 31, 2018

Assets Liabilities

Cash $259,000 Notes Payable 8% $60,000

Inventory $6,000 Accounts Payable $40,000

Prepaid Insurance $3,000 Total $100,000

Supplies $4,000 Common Stock $5 par $140,000

Land $6,000 Excess of par $60,000

Building $480,000 Retained earnings $418,000

Acc. Depr. ( $40,000) $440,000 Total $618,000

Total Assets $718,000 Total Liabilities & Equity $718,000

You are asked to prepare, in good financial form, a set of financial statements for Saratoga Inc. for the quarter ending 3/31/2019.

Jan. 1 – ASTRO purchased equipment for $70,000 and signed a note for the entire cost. The interest rate on the note is 6%. This loan requires monthly payments of $2,000. Monthly payments include interest and principle. Useful life is 5 years.

Jan. 1 – ASTRO purchased on this date for $100,000. Useful life for this machine is 10 years. ASTRO elected to sign a note for the full amount of the purchase price. The note has a 10% rate of interest. Payment on the note will be yearly and the first payment is due December 31, 2019.

Jan. 10 – Purchased $80,000 of inventory. The company paid in full on this date.

Jan. 15 – Issued 200,000 shares of common stock of ASTRO Inc. for $12 per share. All cash received on this date.

Jan. 20 – ASTRO purchased $50,000 of inventory on account.

Jan. 27 – Sales to a customer amounted to $590,000. Received $18,000 in cash on this date.

Feb. 1 – ASTRO made a $2,000 monthly note payment in cash. This note was created on January 1, 2019.

Feb. 15 – Salary and wage expense were paid in the amount of $26,000.

Feb. 27 – The $2,000 monthly note payment was made. This note was entered into Jan. 1, 2019.

Feb. 27 – Received payment in full for the sales generated on Jan. 27, 2019.

Mar. 15 – ASTRO paid $9,000 for advertising.

Mar. 18 – Dividends declared to shareholders for record owners on March 31, 2019 - to be paid on April 1, 2019. The amount of the dividend is $1 per share.

Mar. 31 – Salary and wages paid in the amount of $5,000.

Mar. 31 – Supply Inventory was $1,000.

Mar. 31 - Sales to customer amounted to $35,000 and no discounts were given. Cash was received for the full price.

Mar. 31 - Inventory [merchandise] at March 31, 2019 was $10,000.

Mar. 31 - ASTRO paid wages of $23,000 this date

Mar. 31 - Assume the tax rate is 15% for ASTRO Inc.

Mar. 31 – ASSUME that the prepaid insurance of $3,000 listed on the balance sheet dated December 31, 2018 is the cost of the insurance policy from January 1, 2019 to December 31, 2019.

Building has a useful life of 20 years.

CREATE the following

Statement of Revenue & Expenses {Income statement}

Statement of Retained Earnings

Statement of Financial Position {Balance Sheet}

Tee accounts

All Journal Entries

Answer 1

Sr No.	Particulars	Debit	Credit
1-Jan	Equipment	70000
	Notes Payable 6%		70000
1-Jan	Machine	100000
	Notes Payable 10%		100000
10-Jan	Inventory	80000
	Cash		80000
15-Jan	Cash	2400000
	Common stock		2400000
20-Jan	Inventory	50000
	Account payable		50000
27-Jan	Cash	18000
	Account receivable	572000
	Sales revenue		590000
1-Feb	Interest	350
	Notes Payable 6%	1650
	Cash		2000
	(70000 * 6%) / 12 = 350
15-Feb	Salary and wages expense	26000
	Cash		26000
27-Feb	Interest	350
	Notes Payable 6%	1650
	Cash		2000
	(70000 * 6%) / 12 = 350
27-Feb	Cash	572000
	Account receivable		572000
15-Mar	Advertisment expense	9000
	Cash		9000
18-Mar	Dividend	228000
	Retained earning		228000
	$ 140000 / 5 Par = 28000 shares + 200000 shares issued = Total dividend = 228000*1 = 228000
31-Mar	Salary and wages expense	5000
	Cash		5000
31-Mar	Supply expense	3000
	Supply inventory		3000
	(opening 4000 - 1000)
31-Mar	Cash	35000
	Sales revenue		35000
31-Mar	COGS	126000
	Inventory		126000
	(Opening (6000) + Purchase (80000+50000)-closing (10000) =
31-Mar	Wages	23000
	Cash		23000
31-Mar	Insurance expense	750
	Prepaid insurance		750
	(3000/12)*3 = 750
31-Mar	Depreciation Machine (70000/5)*3/12 =	3500
	Depreciation Equipment(100000/10)*3/12=	2500
	Depreciation Building (480000/20)*3/12=	6000
	Accumulated depreciation		12000

Cash
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
1-Jan	Opening	259000	10-Jan	Inventory	80000
15-Jan	Common stock	2400000	1-Feb	Notes payable	1650
	Sales revenue	18000	1-Feb	Interest	350
27-Feb	Accounts receivable	572000	27-Feb	Notes payable	1350
31-Mar	Sales revenue	35000	27-Feb	Interest	350
			15-Feb	Salary and wages	26000
			15-Mar	Advertisment	9000
			31-Mar	Salary and wages	5000
			31-Mar	Salary and wages	23000
		3284000			146700
			Debit Balance		3137300
Inventory
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
1-Jul	Opening	6000	31-Mar	COGS	126000
10-Jan	Inventory	80000
20-Jan	Notes payable	50000
		136000			126000
			Debit Balance		10000
Notes Payable
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
1-Feb	Cash	1650	1-Jan	Opening	60000
27-Feb	Cash	1650	1-Jan	Equipment	70000
			1-Jan	Machine	100000
		3300			230000
Credit Balance		226700
Common stock
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
			1-Jan	Opening	200000
			15-Jan	Cash	2400000
		0			2600000
Credit Balance		2600000
Prepaid expense
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
1-Jan	Opening	3000		Insurance expense	750
		3000			750
			Debit Balance		2250
Supplies
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
1-Jan	Opening	4000		Supply expense	3000
		4000			3000
			Debit Balance		1000
Depreciation
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
31-Mar	Dep. Machine	3500
	Dep. Equip	2500
	Dep. Building	6000			0
			Debit Balance		12000
Interest
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
1-Feb	Cash	350
27-Feb	Cash	350
		700			0
			Debit Balance		700
Accounts Payable
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
			1-Jan	Opening	40000
				inventory	50000
		0			90000
Credit Balance		90000
Accumulated depreciation
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
			1-Jan	Opening	40000
			31-Mar	Dep.	12000
		0			52000
Credit Balance		52000
Accounts receivable
Debit			Credit
Date	Particular	Amount	Date	Particular	Amount
27-Jan	Inventroy	572000		Cash	572000
		572000			572000
			Debit Balance		0

Statement of revenue and expense
Sales revenue	625000
Less: COGS	-126000
Gross income	499000
Expenses
Salary and wages expense	-54000
Interest expense	-700
Advirtisment expense	-9000
Supply expense	-3000
Insurance expense	-750
Depreciation expense	-12000
Net income	419550
Less Tax Expense (15%)	-62932.5
Income after tax	356617.5
Balance sheet
Asset
Cash	3137000
Inventory	10000
Prepaid insurance	2250
Supplies	1000
Land	6000
Building	480000
Machine	70000
Equipment	100000
Accumulated depreciation	-52000
Total	3754250
Liability
Notes Payable	226700
Accounts Payable	90000
Equity
Common stock	2600000
Retained earning	546617.5
Proposed dividend	228000
Tax payable	62932.5
	3754250
Statement of retained earning	0
Opening retained earning	418000
Less: Proposed dividend	228000
Add: Income statement	356617.5
Closing retained earning	546617.5