Question

Complete, in good form, an Income Statement, Balance Sheet, and Statement of Cash Flows for the following transactions.

Transactions:

T1

Company issues $200,000 of common stock @ $8.00 per share.

T2

Company issues preferred stock @ 7% for $22 per share.

T3

The company borrows on April 1st, 1 million dollars @ 7% interest rate

T4

On June 1st, The company purchases 15 taxi cabs for $20,000, 5% salvage value, 5-year life

T5

Revenue for the whole year was $600,000

T6

Operating expenses were $45,000

T7

The tax rate was 22%.

T8

Common stock dividends were paid on December 31st for the amount of 10% of Net Income, "if-any."

Answer 1

Income statement
	$	$
Revenue		600,000
Less: Expenses		-
Operating expenses	45,000
Depreciation	57,000	102,000
15 * $ 20000 *(100%-5%)/5 Years
Earnings before interests and taxes		498,000
Less: Interest $ 1 million *7%*9/12		52,500
Earnings before taxes		445,500
Less: Taxes		98,010
Earnings after taxes		347,490
Statement of retained earnings
	$	$
Earnings after taxes		347,490
Less: Preferred dividend		38,500
$200,000/8*22 *7%
Earnings after preferred dividend		308,990
Less: Dividend on common stock @ 10%		30,899
Net income		278,091
Balance sheet
	$	$
Current assets
Cash		785,091
Total current assets		785,091
Non current assets
Taxi cabs , net		243,000
Total Non current assets		243,000
Total assets		1,028,091
Equity
Common stock @$8 per share	200,000
7% Preferred stock @ 22 per share	550,000
Net income	278,091
Total equity		1,028,091
Total equity and liabilities		1,028,091

Statement of cash flows
	$	$
Cash flow from operations
Cash received from customer	600,000
Cash paid to supplier	-              45,000
Income tax paid	-              98,010
Cash flow from operations		456,990
Cash flow from investing activities
Purchase of taxi cabs	-           300,000
Cash flow from investing activities		-               300,000
Cash flow from financing activities
Issue of common stock	200,000
Issue of preferred stock	550,000
Dividend paid	-              69,399
Interest paid	-              52,500
Cash flow from financing activities		628,101
Cash and cash equivalents		785,091