Question

Roxy Corp. Prepares its financial statements under U.S. GAAP

During the Year

The company begins operations on January 1, 2016. The company is started by issuing 50,000 shares of common stock for $1,000,000 ($1 Par value stock)

The company immediately purchases $400,000 in inventory for cash and sells $100,000 of this inventory to customer #1 for $150,000 on credit.

The company purchases a machine for $120,000 cash on January 1st and depreciates it over 10 years (depreciation is recorded at year end and there is no salvage value)

On June 1st, customer #1 pays us $70,000 of the amount due.

During June $25,000 dollars of research and development expenses are incurred. $10,000 has not been paid as of yearend.

Required:

Using a separate Excel Spreadsheet, journalize the transactions and create Balance Sheet and Income Statement for year end 2016

Answer 1

Journal Entry
1	Cash a/c	Dr.	1,000,000
	To Common stock A/c			50,000
	To Paid-in capital excess of par value A/c			950,000
2	Purchases A/c	Dr.	400,000
	To cash A/c			400,000
3	#1 Customer A/c	Dr.	150,000
	To sales A/c			150,000
4	Machine A/c	Dr.	120,000
	To Cash A/c			120,000
5	Depreciation Expense A/c	Dr.	12,000
	To Machine A/c			12,000
6	R & D Expense A/c	Dr.	25,000
	To Cash A/c			15,000
	To Account payable A/c			10,000

Income Statement For year ended Dec 2016
						$	$
Revenues (+)
	Sales	150,000
			150,000
Expnese (-)
	Cost of goods sold	100,000
	Depreciation	12,000
	R & D expense	25,000
			137,000
	Net Income		13,000

Balance Sheet as at 31 Dec 2016
Assets	Amount $	Liability	Amount $
Cash	535,000	Account Payable	10,000
Machine	108,000	Common Stock	50,000
Accounts Payable	80,000	Paid-in capital excess of par value	950,000
Closing inventory	300,000	Net Income	13,000
Total Assets	1023000	Total Liability	1023000

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