In: Accounting
Leviathan Global, Inc. (LGI) provides organizational services to opera companies and symphonies. LGI has hired you to prepare its financial statements. Osvaldo Garza, Chief Executive Officer, and 60% shareholder in LGI, has a Master of Fine Arts from the Julliard School in New York, no accounting education or experience, and provided you with the following data: LGI was sued in 2019 from breach of contract. LGI is accused of providing substandard seating at a concert and the petitioner is suing for $100,000 in damages. As of December 31, 2019, the case was still be adjudicated. Osvaldo had a 401K balance of $450,000 as of December 31, 2019. Osvaldo purchased a used Tesla Roadster in 2019 for $80,000. Osvaldo gives you a typed list of LGI income information, expense information, assets and liabilities on December 31, 2019: Accounts Payable $122,000 Land $900,000 Accounts Receivable $313,500 Misc. Expense $129,500 Cash $530,500 Office Expense $630,000 Common Stock $1,000,000 Supplies $ 33,500 Fees Earned $2,632,000 Wages Expense $1,317,000 Retained Earnings on January 1, 2019, were $300,000. During 2019, LGI paid $200,000 in dividends.
What were LGI's Total Expenses in 2019?
Income Statement of LGI | |||
(For the year ended 2019) | |||
Ksh. | Ksh. | ||
Sales Revenue | 26,32,000 | ||
Operating Expenses: | |||
Office Expenses | 6,30,000 | ||
Supplies | 33,500 | ||
Wages expenses | 13,17,000 | ||
Total operating expenses | 19,80,500 | ||
Net Income/Operating Income | 6,51,500 | ||
Working Notes: | |||
1) Trial Balance as on end of 2019 | |||
Dr | Cr | ||
Accounts Payable | 1,22,000 | ||
Common Stock | 10,00,000 | ||
Retained Earning ( January 1, 2019) | 3,00,000 | ||
Fees earned | 26,32,000 | ||
Dividend | 2,00,000 | ||
Accounts Receiveble | 3,13,500 | ||
Land | 9,00,000 | ||
Cash | 5,30,500 | ||
Misc. Expenditure | 1,29,500 | ||
Office Expenses | 6,30,000 | ||
Supplies | 33,500 | ||
Wages expenses | 13,17,000 | ||
Total | 40,54,000 | 40,54,000 | - |
2) Osvaldo is the CEO of LGI and saving in 401k and purchase of Tesla roadster | |||
is his personal assets and expenses and these transaction will not effect the | |||
income and expenditure of LGI. | |||
3) Case of sued for $ 1,00,000 for providing substandard seating at the concert | |||
is a contingent liability as is not yet decided by the court and pending for | |||
adjudicated. So it may assumed the company is not likely considered as | |||
expenses till end of 2019. | |||
4) It is assumed there is no any suppies at the end of the year. That is all supplies | |||
consumed and need to expensed out. | |||
5) Dividend is not an expenses, it is the distribution of profit out of earning retained | |||
and earned, So it should be debit (reduced) from retained earning. | |||
6) Miscellaneous expenses is capitalised expenses, which shall be amoritized as | |||
expenses when economic benefits of this expenditure shall be confirmed. It is | |||
assumed in the absence of any information that not yet amortization to be provided. | |||
So, LGI's total expenses in 2019 is $ 19,80,500 as expense provided in statement of | |||
income. | |||