Question

i. Calculate B.V. of ending equipment assuming you started the year with $100,000 in equipment, purchased $25,000 in new equipment during the year, and deducted $10,000 in depreciation.

ii. Calculate ending receivables assuming opening receivables were $0 and sales and collections for the year were $600,000 and $580,000 respectively.

iii. Calculate ending inventory assuming opening inventory was $40,000 and purchases and COGS were $280,000 and $290,000 respectively.

iv. Calculate ending equity if opening paid in capital was $100,000 and retaining earnings were $10,000, but during the year recorded an after-tax profit of $30,000 and no dividends were paid out. Record ending paid-in capital, retained earnings and total equity separately.

v. Calculate year- ending loan balance if you started the year with a $120,000 term loan with monthly principal payments of $2000. Interest payments for the year totaled $8,000.

Answer 1

4) Calculate ending equity if opening paid in capital was $100,000 and retaining earnings were $10,000, but during the year recorded an after-tax profit of $30,000 and no dividends were paid out. Record ending paid-in capital, retained earnings and total equity separately.

If beginning paid-in capital is $100,000 and retained earnings were $10,000,

And there was an after tax profit of $30,000,

Total equity would be $100,000 + $10,000 + $30,000 = $140,000.

Of this total, $100,000 is still the paid-in capital amount,

A the new retained earnings amount is $40,000 because the profit of $30,000 would go towards retained earnings.

5) Calculate year- ending loan balance if you started the year with a $120,000 term loan with monthly principal payments of $2000. Interest payments for the year totaled $8,000.

Only the principal payments of $2,000 per month would go toward lowering the balance of the loan.

Therefore, the loan would be reduced by $2,000 x 12 = $24,000,

So the year-end balance would be $120,000 - $24,000 = $96,000.

The interest payments are required, but do not lower the principal balance