Question

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...

Answer 1

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