Question

In: Accounting

Pope’s Garage had the following accounts and amounts in its financial statements on December 31, 2013....

Pope’s Garage had the following accounts and amounts in its financial statements on December 31, 2013. Assume that all balance sheet items reflect account balances at December 31, 2013, and that all income statement items reflect activities that occurred during the year then ended. Accounts receivable $ 30,100 Depreciation expense 11,800 Land 25,000 Cost of goods sold 89,500 Retained earnings 60,000 Cash 9,900 Equipment 70,500 Supplies 5,900 Accounts payable 22,400 Service revenue 24,800 Interest expense 1,300 Common stock 8,000 Income tax expense 14,586 Accumulated depreciation 42,000 Long-term debt 38,000 Supplies expense 13,100 Merchandise inventory 29,000 Sales revenue 147,000 Required: a. Calculate the total current assets at December 31, 2013. Loading... b. Calculate the total liabilities and stockholders’ equity at December 31, 2013. Loading... c. Calculate the earnings from operations (operating income) for the year ended December 31, 2013. Loading... d. Calculate the net income (or loss) for the year ended December 31, 2013. Loading... e. What was the average income tax rate for Pope’s Garage for 2013? Loading... f. If $17,500 of dividends had been declared and paid during the year, what was the January 1, 2013, balance of retained earnings? Loading...

Solutions

Expert Solution

a

Particulars Amount
Cash 9,900
Accounts receivable 30,100
Merchandise inventory 29,000
Supplies 5,900
Current assets 74,900

b

Accounts payable 22,400
Long-term debt 38,000
Common stock 8,000
Retained earnings 60,000
Total liabilities and equity 128,400

c

Particulars Amount
Sales revenue 147,000
Service revenue 24,800
Total revenue 171,800
Expenses:
Cost of goods sold 89,500
Depreciation expense 11,800
Supplies expense 13,100
Total expenses 114,400
Operating income 57,400

d

Operating income 57,400
Interest expense 1,300
Income tax expense 14,586
Net income 41,514

e

Opening balance of retained earnings = ending balance + dividends paid - net income for 2013= 60,000 + 17,500 - 41,514 = 35,986


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