Question

In: Accounting

Leviathan Global, Inc. (LGI) provides organizational services to opera companies and symphonies. LGI has hired you...

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?

Solutions

Expert Solution

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.

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