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

1. In the books of Astro Inc. :

Date	Account Titles	Debit	Credit
2019		$	$
Jan 1	Equipment	70,000
	Notes Payable		70,000
Jan 1	Equipment	100,000
	Notes Payable		100,000
Jan 10	Purchases	80,000
	Cash		80,000
Jan 15	Cash	2,400,000
	Common Stock		1,000,000
	Paid-in Capital in Excess of Par		1,400,000
Jan 20	Purchases	50,000
	Accounts Payable		50,000
Jan 27	Cash	18,000
	Accounts Receivable	572,000
	Sales		590,000
Feb 1	Note Payable	1,650
	Interest Expense	350
	Cash		2,000
Feb 15	Salaries and Wages Expense	26,000
	Cash		26,000
Feb 27	Note Payable	1,658
	Interest Expense	342
	Cash		2,000
Feb 27	Cash	572,000
	Accounts Receivable		572,000
March 15	Advertising Expense	9,000
	Cash		9,000
March 18	Retained Earnings	228,000
	Dividends Payable		228,000
March 31	Salaries and Wages Expense	5,000
	Cash		5,000
March 31	Supplies Expense	3,000
	Supplies		3,000
March 31	Cash	35,000
	Sales		35,000
March 31	Inventory ( Ending )	10,000
	Cost of Goods Sold	126,000
	Purchases		130,000
	Beginning Inventory		6,000
March 31	Salaries and Wages Expense	23,000
	Cash		23,000
March 31	Insurance Expense	750
	Prepaid Insurance		750
March 31	Depreciation Expense	48,000
	Accumulated Depreciation : Building		24,000
	Accumulated Depreciation : Equipment		24,000
March 31	Interest Expense ( $ 100,000 x 10 % x 3/12) + $ ( 70,000 - 1,650 - 1,658) x 6% x 1/12	2,833
	Interest Payable		2,833
March 31	Income Tax Expense	57,109
	Income Taxes Payable		57,109

Income Statement:

Income Statement
Astro Inc.
For the quarter ended March 31, 2019
	$	$
Sales		625,000
Less: Cost of Goods Sold		126,000
Gross Profit		499,000
Less: Operating Expenses
Advertising Expense	9,000
Salaries and Wages Expense	54,000
Supplies Expense	3,000
Insurance Expense	750
Depreciation Expense	48,000
Total Operating Expenses		114,750
Operating Income		384,250
Less: Interest Expense		3,525
Income before Taxes		380,725
Income Tax Expense ( 15 %)		57,109
Net Income		323,616

Statement of Retained Earnings:

Astro Inc.
Statement of Retained Earnings
For the quarter ended March 31, 2019
Retained Earnings, December 31, 2018	$ 418,000
Add: Net Income	323,616
Less: Dividends	(228,000)
Retained Earnings, March 31, 2019	$ 513,616

Balance Sheet:

Assets	$	$	Liabilities	$	$
Cash	3,137,000		Accounts Payable	90,000
Inventory	10,000		Income Taxes Payable	57,109
Supplies	1,000		Interest Payable	2,833
Prepaid Insurance	2,250		Dividends Payable	228,000
Total Current Assets		3,150,250	Total Current Liabilities		377,942
Property, Plant and Equipment, net			Long Term Liabilities
Land	6,000		Notes Payable		226,692
Buildings, net	416,000		Total Liabilities		604,634
Equipment, net	146,000	568,000	Stockholders' Equity
			Common Stock	1,140,000
			Paid-in Capital in Excess of Par	1,460,000
			Retained Earnings	513,616
			Total Stockholders Equity		3,113,616
Total Assets		$ 3,718,250	Total Liabilities and Stockholders' Equity		$ 3,718,250