Question
In: Accounting
ABC Company began operations in 2009 and entered into the following transactions during the year: May...
ABC Company began operations in 2009 and entered into the
following
transactions during the year:
May 1: Sold common stock
to owners for $200,000 cash.
May 10: Purchased inventory
costing $40,000 on account.
June 1: Purchased equipment for
$48,000 cash. The equipment
was
assigned a 10-year life and a $6,000 residual
value.
August 1: Purchased a two-year insurance
policy for $24,000 cash.
October 3: Sold one-half of the inventory that was
purchased on
May
10 to a customer for $49,000; the customer did
not
pay for the goods, but agreed to pay XYZ Company
within
ninety days.
November 9: Paid stockholders $10,000 cash as a
dividend.
December 17: Collected a $22,000 partial payment from the
customer
who
purchased the inventory on October 3.
December 31: Recorded adjusting entries related to the
equipment
and
the prepaid insurance.
Calculate the amount of net income, that ABC
Company would report in its 2009 income statement after all the
above transactions are recorded and all necessary adjusting entries
are made and posted.
Calculate the amount of total assets that ABC Company would report in its December 31, 2009 balance sheet after all the above transactions are recorded and all adjusting entries are made and posted.
Calculate the amount of working capital reported by ABC company at December 31, 2009 after all the above transactions are recorded and all adjusting entries are made and posted
Solutions
Expert Solution
Net income: $21550
Total assets: $251550
Total assets = Cash + Accounts receivable + Inventory + Prepaid insurance + Equipment = $140000 + 27000 + 20000 + 19000 + 45550 = $251550
Working capital: $166000
Working capital = Current assets - Current liabilities = ($140000 + 27000 + 20000 + 19000) - $40000 = $206000 - $40000 = $166000
Working:
| Date | Assets | = | Liabilities | + | Stockholders' Equity | Income Statement | |||||||||
| Cash | Accounts Receivable | Inventory | Prepaid Insurance | Equipment | = | Accounts Payable | + | Common Stock | Retained Earnings | Revenue | - | Expenses | = | Net Income | |
| May-01 | 200000 | 200000 | |||||||||||||
| May-10 | 40000 | 40000 | |||||||||||||
| Jun-01 | -48000 | 48000 | |||||||||||||
| Aug-01 | -24000 | 24000 | |||||||||||||
| Oct-03 | 49000 | 49000 | 49000 | 49000 | |||||||||||
| -20000 | -20000 | 20000 | -20000 | ||||||||||||
| Nov-09 | -10000 | -10000 | |||||||||||||
| Dec-17 | 22000 | -22000 | |||||||||||||
| Dec-31 | -2450 | -2450 | 2450 | -2450 | |||||||||||
| -5000 | -5000 | 5000 | -5000 | ||||||||||||
| Bal. | 140000 | 27000 | 20000 | 19000 | 45550 | 40000 | 200000 | 11550 | 49000 | 27450 | 21550 | ||||
Annual depreciation = ($48000 - $6000)/10 years = $42000/10 = $4200
Depreciation expense from Jun. 1 to Dec. 31 = $4200 x 7/12 = $2450
Insurance expense = $24000 x 5/24 = $5000
ekkarill92 answered 1 year agoRelated Solutions
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