Question

Problem 3-8 Financial Statements (LO1)

Henry Josstick has just started his first accounting course and has prepared the following balance sheet and income statement for Omega Corp. Unfortunately, although the data for the individual items are correct, he is very confused as to whether an item should go in the balance sheet or income statement and whether it is an asset or liability.

Problem 3-8 Financial Statements (LO1) Henry Josstick has just started his first accounting course and has prepared the following balance sheet and income statement for Omega Corp. Unfortunately, although the data for the individual items are correct, he is very confused as to whether an item should go in the balance sheet or income statement and whether it is an asset or liability. BALANCE SHEET Payables $ 43 Inventories $ 58 Less accumulated depreciation 128 Receivables 75 Total current assets Total current liabilities Long-term debt $ 390 Interest expense $ 33 Property, plant, and equipment 560 Total liabilities Net fixed assets Shareholders’ equity $ 122 Total assets Total liabilities and shareholders’ equity INCOME STATEMENT Net sales $ 780 Cost of goods sold 620 Selling, general, and administrative expenses 46 EBIT Debt due for repayment $ 33 Cash 23 Taxable income Taxes $ 23 Depreciation 20 Net income Prepare the balance sheet and income statement by rearranging the above items. (Be sure to list the assets and liabilities in order of their liquidity. Enter all amounts as positive values.)

INCOME STATEMENT
Net sales	$	780
Cost of goods sold		620
Selling, general, and administrative expenses		46
EBIT
Debt due for repayment	$	33
Cash		23
Taxable income
Taxes	$	23
Depreciation		20
Net income

Prepare the balance sheet and income statement by rearranging the above items. (Be sure to list the assets and liabilities in order of their liquidity. Enter all amounts as positive values.)

Answer 1

Balance sheet

Asset		$	Liabilities		$
Receivables	75		Payables	43
cash	23		Debt due for repayment	33
Inventories	58
Total current assets		156	Total current liabilities		76
			Long-term debt	390
Property, Plant and Equipment	560		Total liabilities		466
Less accumulated depreciation	-128		Shareholders' equity	122
Net fixed assets		432
Total Asset		588	Total liabilities and shareholders’ equity		588

INCOME STATEMENT
Net sales	780
Cost of goods sold	620
Selling, general, and administrative expenses	46
EBIT		114
Depreciation	20
Taxable income		94
Taxes	23
Net income		71