Question

GGE Enterprises Inc.

On November 1 of the current year, Rob Elliot invested $30,000 of his cash to form a corporation, GGE Enterprises Inc., in exchange for shares of common stock. No other common stock was issued during November or December. After a very successful first month of operations, the retained earnings as of November 30 were reported at $5,000. After all transactions have been entered into the accounting equation for the month of December, the ending balances for selected items on December 31 follow. On that date, the financial statements were prepared. The balance sheet reported total assets of $56,650 and total stockholders' equity of $36,205.

Cash

Supplies

Land

Accounts Payable

Common Stock

Retained Earnings

Dividends

Fees Earned

Wages Expense

Rent Expense

Supplies Expense

Utilities Expense

Miscellaneous Expense

?

$8,850

$17,000

?

?

$5,000

$7,000

$26,000

$6,325

?

$4,550

$1,220

$400

Review the following questions. Indicate which financial statement(s) report the desired information. Enter the amount reported on the financial statement.

(Select "Yes" or "No" from the below dropdowns.)

	Balance Sheet	Income Statement	Statement of Stockholders' Equity	Amount
1. What is the amount reported for total liabilities and stockholders' equity on December 31?	Yes	No	No	$
2. What is the retained earnings amount reported on December 31?	Yes	No	Yes	$
3. How much does GGE Enterprises Inc. owe to its creditors?	Yes	No	No	$
4. How much cash is being held by GGE Enterprises Inc.?	Yes	No	No	$
5. By what amount did retained earnings increase or decrease during the period?	No	No	Yes	$
6. What is the amount of profit or loss during December?	No	Yes	Yes	$
7. What were the total expenses for December?	No	Yes	No	$
8. How much was paid for rent?	No	Yes	No	$

Answer 1

Answer 1.

Total Liabilities and Stockholders’ Equity = Total Assets
Total Liabilities and Stockholders’ Equity = $56,650

Answer 2.

Total Stockholders’ Equity = Common Stock + Retained Earnings
$36,205 = $30,000 + Retained Earnings
Retained Earnings = $6,205

Answer 3.

Total Liabilities and Stockholders’ Equity = Total Liabilities + Total Stockholders’ Equity
$56,650 = Total Liabilities + $36,205
Total Liabilities = $20,445

Total Liabilities = Accounts Payable
Accounts Payable = $20,445

Answer 4.

Total Assets = Cash + Supplies + Land
$56,650 = Cash + $8,850 + $17,000
Cash = $30,800

Answer 5.

Increase in Retained Earnings = Retained Earnings, December 31 - Retained Earnings, November 30
Increase in Retained Earnings = $6,205 - $5,000
Increase in Retained Earnings = $1,205

Answer 6.

Increase in Retained Earnings = Net Income - Dividends
$1,205 = Net Income - $7,000
Net Income = $8,205

Answer 7.

Net Income = Fees Earned - Total Expenses
$8,205 = $26,000 - Total Expenses
Total Expenses = $17,795

Answer 8.

Total Expenses = Wages Expense + Rent Expense + Supplies Expense + Utilities Expense + Miscellaneous Expense
$17,795 = $6,325 + Rent Expense + $4,550 + $1,220 + $400
Rent Expense = $5,300